Toll Brothers Inc. (TOL) Friday cut its forecast for the number of homes it expects to sell in fiscal 2006, as quarterly orders fell 32 percent.

The decline in orders reflects softening demand and a build up of homes on the market, especially by speculators who are unloading their investments as their anticipated profit evaporates.

Toll said it expects to close on sales of 9,000 to 9,700 homes for the fiscal year ending Oct. 31, down from its forecast of 9,200 to 9,900 homes. It was the third time since November that Toll slashed its forecast for the number of homes it expected to sell in the year.

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"I think the Street was looking for weakness, just not this weak," said John Tomlinson, senior analyst with Majestic Research an independent research firm.

Higher home prices and mortgage rates have taken its toll on U.S. home buying, which began to soften after the summer. Since July, shares of Toll Brothers have lost 47 percent of their value, as its high-end customers are considered more knowledgeable about the housing market and have more discretion not to trade-up from their existing homes.

New orders, excluding ones from its joint ventures, fell to 2,167 from 3,181, while the value of the contracts declined 29 percent to $1.56 billion. Orders fell sharply in Toll's biggest market — the Mid-Atlantic states of Delaware, Maryland, Pennsylvania and Virginia — where they were off 45 percent.

"Speculative buyers are no longer fueling demand," Robert Toll, chairman and chief executive, said in a statement. "Instead they're putting the homes they've recently acquired back on the market, or are canceling contracts in mid-construction."

He added that the oversupply is being "aggressively discounted by others."

Would-be buyers also were spooked, as the cancellation rate for the quarter was 8.5 percent, above Toll's historic average of 7 percent, the company said.

Toll said revenue for the second quarter ended April 30 rose 18 percent from a year ago to $1.44 billion. Analysts, on average, expected $1.45 billion, according to Reuters Estimates. Quarterly revenue reflects orders taken about one year ago.

The Toll forecast came after rival Hovnanian Enterprises Inc. lowered its second-quarter forecast on May 1 because of an expected 20 percent decline in contracts.

Horsham, Pennsylvania-based Toll ended the quarter with a backlog of 8,739 homes under contract and awaiting construction valued at $6.07 billion, up 3 percent.

The company will release second-quarter results on May 23. Analysts, on average, see a profit of $1.04 per share, according to Reuters Estimates.

In February, Toll said it expected fiscal 2006 income of $4.77 to $5.26 per share. Analysts see full-year earnings of $4.98 per share, excluding items.

Shares fell 38 cents to $29.26 in premarket Inet trading from Thursday's New York Stock Exchange close of $29.64, their lowest level since December 2004.

To help prop up the company's sagging stock price, Toll bought back 1.3 million shares during the quarter, for a total of 3.9 million, or 2.5 percent of its outstanding shares.

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