In another sign of a slowing housing market, luxury-home builder Toll Brothers today reported a 29 percent drop-off in signed contracts for new homes in the second quarter totaling $1.56 billion.
The Horsham, Pa.-based builder reported an 18 percent increase in second-quarter home-building revenues of $1.44 billion, in preliminary results released today. Second-quarter-end backlog rose 3 percent to approximately $6.07 billion.
The company recorded a 25 percent increase in home-building revenue to $2.78 billion for the six-month period ended April 30, 2006, while signed contracts of about $2.7 billion declined 26 percent from the same period last year.
Based on its six-month deliveries and current backlog, the company believes it will deliver between 9,000 and 9,700 homes in fiscal 2006, a reduction of 200 homes from its previous guidance range.
Today’s results are preliminary and unaudited, and Toll Brothers will announce final totals when it releases second-quarter and six-month earnings results and updated guidance on May 23.
“We are entering our ninth month of slower sales in most of our markets,” Robert I. Toll, chairman and CEO, said in a statement today.
Speculative buyers are no longer fueling demand, he said, and also are adding homes they’ve recently acquired back on the market. More supply also is coming from other building companies that are starting speculative homes and from their “non-spec-buyer” cancellations, and much of the new supply on the market is being aggressively discounted, he said.
“Generally we do not sell to speculators nor build spec homes, but we have certainly been impacted by the overall increase in supply,” Toll said.
“Ordinary demand has also slackened as the typical buyer worries about the direction of home prices. Our cancellation rate was 8.5 percent in the second quarter, which, although higher than our historic average of approximately 7 percent, is still, we believe, the lowest among the major public home builders,” he said.
Toll said the company expects the excess supply on the market to be a short-term phenomenon and that “relatively soon the imbalance between tight supply and growing demand will return.”
The demographics of Toll Brothers’ targeted luxury market remain strong, he said.
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