PHILADELPHIA, May 5 (AP) — Toll Brothers, the builder of luxury homes, said on Friday that signed contracts for its homes fell 29 percent in the second quarter and that home deliveries for the year would be 200 lower than expected as the housing market began to slow.
After five years of explosive growth, the housing market is in the grip of a slowdown prompted by rising mortgage rates and higher inventories.
"It's pretty much what we had thought," said William Mack, a home building analyst for Standard & Poor's. "Things are slowing and at a pretty rapid rate."
But shares of Toll Brothers and other home builders rose yesterday because a weaker-than-projected jobs report for April was seen on Wall Street as giving the Federal Reserve less incentive to raise interest rates. That would slow the rise of mortgage rates.
While sales of new homes rose 13.8 percent nationally in March, the median price of homes sold dipped 2.2 percent as builders cut prices. Sales of existing homes edged up in March, but the backlog of unsold homes hit a record high, according to the National Association of Realtors.
Even Toll Brothers, whose well-heeled customers are less vulnerable to economic winds, is not immune.
For the second quarter, Toll said signed contracts came in at $1.56 billion, down from last year's $2.2 billion. Its backlog rose 3 percent to $6.07 billion from $5.87 billion in 2005. The biggest declines in signed contracts were on the East Coast.
Toll predicted it would deliver 9,000 to 9,700 homes in fiscal 2006, a decline of 200 homes from its previous outlook.
Other home builders are feeling the pinch as well.
On Tuesday, Hovnanian Enterprises lowered its outlook for the second quarter and the year. Hovnanian cited cancellations, slowing sales, higher material costs and increased concessions and incentives.
Another builder, the Centex Corporation, recently said its new orders fell 11 percent in the fourth quarter. The company also scaled down its earnings forecast for 2007. Pulte Homes and Beazer Homes USA also said new orders fell during the quarter.
Toll Brothers attributed the drop in contracts and deliveries to fewer speculative buyers, more cancellations from nonspeculative buyers and weaker demand from those worried about the direction of home prices.
The cancellation rate over the quarter was 8.5 percent, higher than Toll's historic average of about 7 percent.
"Speculative buyers are no longer fueling demand," said Robert I. Toll, the company's chairman and chief executive. "Instead, they're putting the homes they've recently acquired back on the market or are canceling contracts in midconstruction."
Read more: http://www.nytimes.com/2006/05/06/b...rtner=TOPIXNEWS