NEW YORK – Luxury home builder Toll Brothers Inc. (TOL) Wednesday said new orders and revenue fell in the quarter just ended, prompting the company to further reduce the number of homes it expects to build this year, as the U.S. housing market continued its slide.
Preliminary numbers show that new orders fell 47 percent to 1,443 in the fiscal third quarter ended July 31 from the same period last year, Toll said. The value of the contracts fell 45 percent to $1.05 billion from $1.92 billion.
Building revenue during the quarter slipped to $1.53 billion from $1.54 billion, and its backlog of homes on order but not yet constructed tumbled 13 percent to $5.59 billion from $6.43 billion.
The company, based in Horsham, Pennsylvania, attributed the weakness to an oversupply of homes on the market, as speculators try to unload their investments and potential buyers sit on the sidelines waiting for better deals. Toll said cancellation rates ran high during the quarter, especially in last year's hot markets of Orlando, Florida; Las Vegas, Nevada; Phoenix, Arizona; and Palm Springs and Northern California.
As a result of the slower demand and building pace, Toll said it expects to walk away from land options set to expire, and announce a write-down when it reports its results Aug. 22 if it can't renegotiate the price
Toll said it expects to close on sales of 2,500 to 2,800 homes in the fourth quarter ending Oct. 31, down from an earlier prediction of 2,900 to 3,300. It also slashed its forecast for the number of homes it expects to sell in the year to a range of 8,600 to 8,900 from an earlier reduced forecast of 9,000 to 9,700 homes.
It was the fourth time since November that Toll had cut its forecast for number of homes it expects to sell.
Since July, shares of Toll Brothers have lost more than half their value, while the while the Dow Jones U.S. Home Construction Index, a yardstick used to measure home builder performance, is down 44 percent.
Toll's forecast came a week after Hovnanian Enterprises Inc., also in the luxury home market, slashed its forecast and reported greater cancellations.