Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Tuesday, August 22, 2006

Crisis of Confidence....


(Bloomberg) -- "Toll Brothers Inc., the largest U.S. luxury homebuilder, said fiscal third-quarter profit fell 19 percent, the first decline in four years as higher mortgage rates ended the housing boom."

"Toll Brothers cut its forecast for fourth-quarter profit as rising rates reduced demand for its houses, which sell for as much as $1.5 million. The market for expensive homes was the first to slow as wealthy buyers deferred purchases. After 17 rate increases by the Federal Reserve in the last two years, the number of new unsold single-family homes are at an all-time high."

'``Homebuyers are having a crisis of confidence,'' said Sam Lieber, chief executive of Alpine Management and Research in Purchase, New York, which has $3.7 billion under management including 800,000 shares of Toll. ``Even if they want to buy a new house, they're worried they can't sell the house they're in.'''

"Orders for houses, a gauge of future revenue, fell 48 percent to 1,400 from 2,705 in the quarter, excluding unconsolidated partnerships, Toll said in an Aug. 9 preliminary report on the quarter's earnings. It was the third consecutive year-over-year decline following 10 quarter of gains."

'``No one wants to be the guy who bought at the peak,'' Barron said. ``There's a lot of fear in the market right now, and that's translating into an oversupply of homes.'''

Market's `Malaise'
`'`The continuing malaise in the housing market, we believe, is the result of an oversupply of inventory,'' Chief Executive Officer Robert Toll said in the statement."

"A record 566,000 new houses were for sale in the U.S. at the end of June, the Commerce Department said in a July 27 statement. It reports July's inventory and sales Aug. 24 at 10 a.m. New York time."

"Toll Brothers cut its land holdings by 2.2 percent in the third quarter from the previous three months, to 82,800 lots. The company wrote off $21.1 million in so-called ``options,'' or contracts to buy land at pre-set prices, according to the report. The write-offs were primarily in Florida and California."

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