In another sign that the housing turmoil is not letting up, luxury homebuilder Toll Brothers Inc. reported double-digit declines in new home orders, revenue and home prices in its fiscal second quarter that ended April 30.
And executives expect more “challenging times ahead.”
The Horsham, Pa., builder reported that net new home orders tumbled 44% to 929 units from 1,647 units a year ago.
The dollar value of the orders plummeted 58% to $496.4 million, from $1.17 billion a year earlier.
Investors consider orders a key metric in determining a company’s future earnings because orders reflect revenue the company will receive when a home closes two or three quarters later.
Toll Brother’s homebuilding revenue fell 30% to $817.9 million in the latest quarter while the average home price slipped 25% to $534,000, from $710,000 a year ago.
UBS analyst David Goldberg attributed the price decline to fewer sales in high-priced markets such as California and Manhattan, a shift in product mix where sales of lower-prices homes increased, and cancellations of higher-priced home contracts.
The company also expects to take more write-downs, probably in the range of $225 million to $375 million, when it reports its fiscal second quarter earnings results.
“With conditions still weak in most markets, we expect to continue to face challenging times ahead,” Chief Financial Officer Joel Rassman said in a statement.
“Buyers remained on the sidelines” for much of the quarter, Robert Toll, chairman and chief executive of Toll, said in a statement.
“When we held promotions, buyers have come out to play and put down deposits,” he said. “Often, however, a lack of confidence in the direction of home prices overcomes their enthusiasm, and they don’t take the next step of going to contract.”
Mr. Toll said his company is focusing on its balance sheet and liquidity during these turbulent times so that it will be well positioned when the market rebounds.
“When the market recovers, we believe our playing field, which is the luxury market, will have fewer competitors,” he said.
It is clearly a buyers’ market, but buyers can only take advantage of it if they buy. Sooner or later they will, but, unfortunately, we can’t predict when.”
