The Housing Slump Takes a Toll on Toll Brothers
Thursday, February 22, 2007PAUL KANGAS: Toll Brothers lowered its forecast for 2007 home deliveries today as it reported another slump in sales. The luxury home builder's fiscal first quarter profits plunged 67 percent on large write-down charges for lower land values. Toll Brothers earned $0.33 a share on the quarter, down sharply from year ago levels but $0.04 ahead of Street estimates. As Stephanie Dhue reports, the nationwide builder is seen as a bellwether for the housing industry.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Toll Brothers, which just two weeks ago said the housing market was dancing at the bottom, today suggested that dance will be a slow waltz. CEO Robert Toll says he was disappointed with sales over the traditionally strong President's day weekend.
ROBERT TOLL, CEO, TOLL BROTHERS: Presidents Day weekend we had good sales, but we didn't have anywhere near the bump up that we normally see.
DHUE: Toll's experience is typical of the industry which continues to struggle with buyers canceling contracts, high inventories and a slump in demand. Still, National Association of Homebuilders economist Bernard Markstein sees the housing market stabilizing.
BERNARD MARKSTEIN, ECONOMIST, NATIONAL ASSOCIATION OF HOME BUILDERS: Given that starts are down, which suggests a lower level of production, we're figuring that the inventory overhang will at least be worked down to a reasonable level by late spring, early summer.
DHUE: Freddie Mac chief economist Frank Nothaft predicts home sales and new construction will begin to pick up in the second half of the year, but he says the recovery will be slow.
FRANK NOTHAFT, CHIEF ECONOMIST, FREDDIE MAC: The reason is because affordability really deteriorated in 2005 with the rapid acceleration in house price growth and it's going to take a while for affordability conditions to improve, especially in the high cost markets around the country.
DHUE: With mortgage lenders just now beginning to tighten their standards for new loans, analyst Andy Laperriere predicts home prices will continue to weaken.
ANDY LAPERRIERE, ANALYST, ISI GROUP: So I think we're going to see over the coming months and even the next couple years, that we're going to find that it's a lot harder to get financing on the same easy terms that it has been the last couple of years and that's going to reduce demand for housing and continue to put downward pressure on home prices.
DHUE: As the traditional peak spring selling season begins, signs point to a rough road ahead. Analysts say large numbers of vacant homes for sale and for rent could drive prices lower. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
