Tougher lending standards for mortgages and weak consumer confidence erased hopes for a new-home market rebound in the second quarter, Toll Bros. Inc. said today in a preliminary earnings report.
The Horsham luxury-home builder said its second-quarter revenue fell 19 percent, to $1.17 billion, backlog dropped 32 percent, to $4.15 billion, and signed contracts declined 25 percent, to $1.17 billion.
Even so, Toll Bros. said some of its markets - such as Philadelphia; New York; Raleigh, N.C.; Dallas; and northern California - did well. Many more were weak, though - especially Florida; Detroit; and Reno, Nev., chief financial officer Joel Rassman said.
"Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets," chief executive officer Bob Toll said in a statement. He said traffic in existing subdivisions, or communities, was down about 20 percent in the second quarter compared with the year-earlier period.
The company's second-quarter cancellation rate - a key measure because it indicates the willingness of a buyer to walk away from a purchase and potentially lose thousands of dollars from a nonrefundable deposit - fell to 19 percent. The average nonrefundable deposit is about $50,000. The cancellation rate was 30 percent in the first quarter.
Toll Bros. said it would not meet the 2007 earnings forecast it had issued Feb. 22, which projected homebuilding revenue of $4.2 billion to $4.96 billion and net income of $240 million to $305 million, or $1.46 to $1.85 a share.
The company has not said whether it will issue a new forecast, though Rassman said the market had weakened each month since February.
Toll Bros. said it anticipated write-downs of $90 million to $130 million in the second quarter. In the last year, company has taken write-downs of $248 million. The write-downs reflect lower selling prices for homes, a slower sales pace, and a tough land-approval environment.
The company's stock shed 16 cents, or less than 1 percent, to close at $29.05.
Bruce Toll, vice chairman of Toll Bros., is an investor in and chairman of Philadelphia Media Holdings L.L.C., which owns The Inquirer, the Daily News, and Philly.com.