Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Wednesday, August 09, 2006

The Bell Tolls....

...For Toll and his Brothers and Everyone Who Looks Like Them.

NEW YORK (Reuters) - "Luxury home builder Toll Brothers Inc. (NYSE:TOL - news) on Wednesday said new orders and revenue fell in the quarter just ended, prompting the company to slash for the fourth time 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."

'"This is worse than we expected," said Majestic Research analyst John Tomlinson. "I don't think we've quite reached the bottom."'

"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 August 22 if it can't renegotiate the price."

"The news sent shares of Toll down 5 percent and helped drive down most of the other large home builder shares."

"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."

"Toll's forecast came a week after Hovnanian Enterprises Inc.(NYSE:HOV - news), also in the luxury home market, slashed its forecast and reported greater cancellations."

"The pain is not limited to the luxury market. In a filing on Tuesday D.R. Horton Inc.(NYSE:DHI - news), the largest U.S. home builder, said the decline in new orders in July was worse than June and that cancellations were higher."

“‘It appears that the current housing slowdown is somewhat unique: It is the first downturn in the 40 years since we entered the business that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors,’ said CEO Robert Toll."

"‘Instead, it seems to be the result of an oversupply of inventory and a decline in confidence: Speculative buyers who spurred demand in 2004 and 2005 are now sellers; builders that built speculative homes must now move their specs; and nervous buyers are canceling contracts for homes already under construction.’”


At 8/09/2006 09:42:00 AM , Blogger Rob Dawg said...

Just wait for the other shoe. If you think a slowdown kills the HBs there's something of a baseball bat to the skull coming soon. Real soon now one or more of the HBs are going to report a month of NEGATIVE sales. More cancellations that orders. It is an anomaly and statistically meaningless but the markets are going to treat it like they did the tech suppliers in 2001 when they had to write down their excess inventory. Fugly.

At 8/09/2006 12:31:00 PM , Blogger M.S.A. said...

Unique slow down? What about the uniqueness of soaring prices in the past four years. Median income earners borrowing truckloads of money, amounts lenders would have scoffed at 3-4 years ago.
Troll Brothers and other homebuilders have lost 50%+ in the past year. Fb's be prepared, your home values may follow suit.

At 8/11/2006 12:03:00 PM , Blogger BoomBust said...

It tolls for thee.


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