Mr. Toll was remarkably frank in his comments today. What a change from his "We will crush the shorts!" comments of 18 months ago.
us.ft.com
Toll warns on deepening housing slump
By Daniel Pimlott in New York
Wednesday Aug 8 2007 16:20
The chief executive of Toll Brothers (NYSE:TOL) said buyer interest in its homes was at the lowest in 20 years in the last quarter, as the largest luxury home builder warned on Wednesday that the US housing slump might get even worse.
Six weeks in the earlier part of the quarter, which ran until the end of July, saw the "lowest traffic on a per community basis that we have ever had", said Robert Toll, meaning that the company's housing developments had received on average less visitors than at any time since it went public in 1986.
Mr Toll indicated he saw little prospect for improvement in the market in the near term.
"With the uncertainties roiling the mortgage markets right now, the pace of home sales could slow further until the credit markets settle down," said Mr Toll, as he announced that the company's revenues fell in its third quarter. He cautioned that increasingly tight lending standards for mortgages would deepen the crisis.
Lenders have been raising requirements for home loans following a flood of defaults and late payments on homes purchased with subprime mortgages - loans to people with patchy credit histories. This, combined with still falling prices across most of the US, has deterred home buyers, leading to a string of poor results and losses for major housebuilders, such as KB Home and DR Horton.
Toll's warning came as the National Association of Realtors lowered its forecast for home sales for the year, but said it did not expect a dramatic worsening in the market.
It forecast some improvement by the end of this year in resales of homes, with new home sales picking up next year. The rate of new home sales in June was at its second lowest since September 1999.
"We are now in the 23rd month of a down housing market," Mr Toll said.
He added: "Surely it can go on for another year to a year and a half with no problem at all."
The cautionary note from Toll Brothers is particularly troubling because the company mainly sells high-end homes which have fared better in avoiding the fall-out from the subprime crisis. The company's earnings have still fallen every quarter in the past year. If the tough conditions do not alleviate, Mr Toll said he would be forced to start sacking staff.
Toll said home building revenues fell 21 per cent to $1.21bn. Its cancellation rate was 23.8 per cent, up from 18.9 per cent in the previous quarter. |
