Toll Brothers Market Cap Per Housing Starts

With growing consensus that the housing market has finally turned from the bottom, home builder Toll Brothers' stock has seen a huge rally of late.  Year to date TOL is up 62% and its market cap is now $5.5B.  That's still $3B below its peak in 2005, but housing starts also peaked at over 2 million back then.  Today housing are only 746k.

Below is a comparison of TOL's market cap relative to aggregate housing starts.  The analysis ignores changes in market share, but should give a rough sense of what the stock is forecasting.  For TOL's market cap/housing start ratio to go back to the $800 it was at in 2002, housing starts would mathematically have to rise to nearly 7 million, which is definitely not happening.  If housing starts returned to 2 million, which is also far-fetched, TOL would sell for ~$2,750 per aggregate start--still above where the ratio held in 2002-2004.