Toll Brothers Inc. (TOL) on Tuesday cut its outlook for 2006, saying tougher land-use reviews will mean a lower supply of houses and softening demand in some markets will slow its ability to raise prices, sending its shares tumbling 12 percent in premarket activity.

"The 400 to 700 home reduction in our projected fiscal year 2006 delivery guidance should reduce our earnings growth projections for fiscal 2006." Joel Rassman, Toll's chief financial officer, said in a statement.

The news sent Toll shares down to $34.80 in premarket activity on the Inet stock exchange, from its Monday close of $39.41 on the New York Stock Exchange.

The company expects to announce its revised earnings outlook when it reports results for its fiscal fourth quarter and year ending Oct. 31, on Dec. 8.

Toll said it expects to close on 9,500 to 10,200 homes in the current fiscal year ending in October, down from a prior forecast of 10,200 to 10,600 homes.

The company said longer permitting processes cut the number of developments in which it sells homes to 230 at the end of the fiscal fourth quarter 2005, instead of the 237 it projected. Toll expects the number of communities to remain at 230 through the current fiscal first quarter.

During the fourth quarter, Toll said the number of contracts from its consolidated businesses rose 1 percent to 2,272 and their value rose 3.7 percent to $1.59 billion. The contracts are not recorded as revenue until the home is built and the sale is closed.

"We believe a shortage of selling communities, coupled with some softening of demand in a number of markets, negatively impacted our contract results," Chairman and Chief Executive Robert Toll said in a statement.