Toll Brothers Inc., the largest U.S. builder of luxury houses, said fiscal first-quarter homebuilding revenue dropped 19 percent as customers canceled contracts. The company said land writedowns will exceed previous forecasts.
Homebuilding revenue declined to $1.09 billion in the three months ended Jan. 31 from $1.34 billion a year earlier, Horsham, Pennsylvania-based Toll said today in a statement.
Orders for Toll Brothers, whose houses cost three times the U.S. median, have fallen as its inventory of unsold homes swells. That has led many luxury-home buyers to balk at making a purchase on the expectation of falling prices or higher sales incentives. Lennar Corp. and D.R. Horton, the two largest U.S. home builders, have reported profit declines as incentives failed to stem cancellations and sales slumped the most in 15 years.
``It appears that the pace of cancellations is starting to abate,'' Chief Executive Officer Robert Toll said in the statement. ``However, we are still well above the company's historical average of about 7 percent.''
"Incentives are failing to stem cancellations". That's a big deal. For the last 9-12 months, home builders have offered incentives to encouraged purchasers. Some of these incentives have been pretty big. But these aren't working as well as expected. Basically, homebuilders are having trouble paying people to purchase homes.
In addition, Toll Brothers caters to the high-end market -- the part of the market that shouldn't be bothered by a recession. Even this part of the market is slowing down. That's a big deal as well.
Housing bottom? Very doubtful at this point.