The Housing Chronicles Blog: Luxury builder Toll Brothers profitable, but says buyers are "hiding"

Wednesday, February 6, 2008

Luxury builder Toll Brothers profitable, but says buyers are "hiding"

After seven consecutive quarters of declines in revenue and earnings, luxury builder Toll Brothers still managed to eke out a profit during their fiscal first quarter, although Bob Toll says buyers are still 'hiding' due to ongoing concerns about the economy. From an AP business story:

On Wednesday, Toll Brothers said home building revenue fell by 22 percent in the first quarter, its seventh consecutive quarterly decline. Toll said that despite historically low mortgage rates and falling home prices, a slowing economy could be spooking buyers.

"Buyers seem to be hiding," Toll said. "The market's problem is a lack of confidence, not just regarding the direction of home prices, but ... the overall economy."...

Anna Torma, an analyst at Soleil, said in a research note that Toll needs to "aggressively" cut prices of backlog inventory to sell "spec" homes - those without a predetermined buyer.

Toll said he's raising deposit requirements to deter cancellations and avoid having specs, which increases the risk to the builder.

"We're not interested in selling houses and collecting deposits and getting stuck with specs" if buyers cancel, Toll said in a conference call with analysts.

The Horsham-based builder expects to post pretax write-downs of $150 million to $300 million in the first quarter. Full earnings results will be released on Feb. 27.

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