Toll Brothers preliminary 2Q sales fall 30 percent

PHILADELPHIA -- Investors scouring for hints of a housing upturn won't find much evidence in the second-quarter preliminary sales results of luxury-home builder Toll Brothers Inc.

In spite of reduced housing prices, lower mortgage rates and more homes for sale, the Horsham-based builder said buyers are staying on the sidelines. Preliminary home-building sales in the quarter fell by 30 percent from a year ago to $817.9 million.

Toll Brothers, known for its resistance to slashing prices to move inventory, saw its average contracted price after cancellations hit a six-year low of $534,000 per home. Higher incentives, fewer sales of high-priced homes and a change in product mix to lower-priced units took down the average price.

"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," Chief Executive Robert Toll said in a statement.

He said buyers are attracted by promotions and put down deposits. But "a lack of confidence in the direction of home prices overcomes their enthusiasm" and they don't go to contract, Toll said.

Consumers aren't making real estate deals, but neither is Toll Brothers. The builder said it is looking for land deals, but hasn't yet seen the "high-end communities at bargain prices" it likes.

Second-quarter backlog of homes ordered but not yet delivered was cut in half to $2.08 billion.

Toll Brothers expects writedowns of $225 million to $375 million in the second quarter, to adjust the value on its books of homes it can no longer sell at a profit. Earnings will be released June 3.

Geographically, sales fell the most in the southern states of Florida, Georgia, the Carolinas and Texas. The mid-Atlantic, covering Pennsylvania, Delaware, Maryland, Virginia and West Virginia, was down 39 percent.

The west, comprising California, Arizona, Colorado and Nevada, fell 28 percent.

Toll's northern region of New Jersey, New York, Connecticut, Rhode Island, Illinois, Massachusetts, Michigan and Minnesota was down 3.3 percent to $239.1 million. A bright spot is Manhattan, where Toll said homes have temporarily sold out.

Net contracts, an indication of future business, fell 79 percent in the north, 62 percent in the west, 44 percent in the mid-Atlantic and 31 percent in the south.

Shares of Toll Brothers fell by 5 cents to $23.32 in morning trading.