Despite loss, Toll Bros. sees stabilizing signs

Luxury homebuilder Toll Brothers Inc. posted a loss and a 27% decline in net new-home orders in its fiscal third quarter, ended July 31. However, the Horsham, Pa., company reported some signs of stabilization in the market. “We are now completing the third year of the worst housing market since we started in 1967,” Robert Toll, chairman and chief executive of Toll, said in a statement. However, the number of people visiting the company’s sales sites and putting deposits down have been “stabilizing” in the past several months, he said. Also, the number of contract cancellations fell to their lowest level in nine quarters, Mr. Toll said. These signs of improvement came despite “rising unemployment and severe mortgage and credit conditions,” he said. “We believe there is pent-up demand,” Mr. Toll said. But David Goldberg, an analyst with UBS Securities LLC in New York, said he believes that Toll’s optimism is premature. The signs of stabilization reflect Toll’s specific communities, not a broader housing trend, he said. “We continue to forecast a second half of 2009 trough in housing, reflecting the impact of continued pricing pressure driving by higher foreclosure levels,” Mr. Goldberg said. Toll reported a loss of $29.3 million, or 18 cents a share, in the latest quarter, compared with net income of $26.5 million, or 16 cent a share, a year ago. Net new-home orders, which refer to the number of new contracts signed after canceled contracts have been netted out, fell 27% from a year earlier. The dollar value of the contracts was $469.9 million, down 35%.