BACKLASH: Homebuyers are becoming better informed about the still-inflated home prices nationwide. Many are waiting, and the patience is showing up in the profits of homebuilders, homesellers, Realtors, lenders and everyone else who got excited about the housing bubble and helped drive the housing market off a cliff.
Toll Brothers reports $81.8M 4Q loss in housing downturn; calls 2007 WORST YEAR IN FOUR DECADES
NEW YORK (AP) — Toll Brothers Inc., the nation’s largest builder of luxury homes, said Thursday it swung to a loss for its fourth fiscal quarter during what the company calls the worst housing downturn in decades. It is the first quarterly loss recorded by the builder in 21 years.
“By many measures, fiscal 2007 was the most challenging of the 40 years that Toll Brothers has been in business,” Robert Toll, chairman and CEO, said in a statement. “1974 was perhaps rougher, but the difficult times only lasted one year.”
The housing market, after booming for several years, has been plagued by excess inventory, defaults in subprime mortgages and tightening of credit as lenders become choosier about borrowers.
Toll’s results underscore that conditions in the sector, now in its third year of decline, worsened through fall. The Horsham, Pa.-based company reported a net loss of $81.8 million, or 52 cents per share, for the three months ending Oct. 31, compared with a net income of $173.8 million, or $1.07 per share, a year ago.
The loss included $314.9 million in pretax writedowns, mainly for homes it could no longer sell at a profit. In the fourth quarter of 2006, pretax writedowns totaled $115 million. Without the writedowns, Toll Brothers would have posted fourth-quarter earnings of 72 cents per share, less than half the $1.49 per share
profit that was posted during the same quarter a year earlier.
Analysts polled by Thomson Financial expected a loss of 77 cents per share. The predictions typically exclude one time charges or writedowns. Revenue fell by 35 percent to $1.17 billion in the quarter, slightly ahead of Wall Street’s forecast of $1.166 billion. Net signed contracts fell by 48 percent to $365.3 million — a measure of future sales activity. Toll shares rose $1.26 cents, or 6.1 percent, to $21.98 midday, as investors reacted to the narrower-than-expected loss, primarily because writedowns were less severe than
forecast.
In the latest reporting period, homebuilders have recorded more than $6 billion in combined charges, which are taken to adjust the book value of unsold property as housing prices decline in most major markets. Toll has been less aggressive about cutting prices — which eats into short-term profits — than many of its competitors.
Banc of America analyst Daniel Oppenheim said Toll’s reluctance to cut prices only pushes probable charges into 2008 as housing prices continue to fall around the country. “We believe Toll will suffer larger
impairments in the future by resisting lower prices as falling home prices mean selling a home in the future nets fewer proceeds than selling today,” he said.
Robert Toll said recent nationwide price declines and relatively low interest rates create a buyer’s market, but blamed consumer concerns about a possible economic recession for a lack of demand. The company said it has streamlined operations to better match reduced business, and that “pent up demand has been building.”
“As soon as we remove the fear of dropping home prices, we may witness a faster and stronger recovery than anticipated,” he said.
Looking ahead, the company said the market is too volatile to provide earnings guidance. However, it expects to deliver between 3,900 and 5,100 homes in fiscal 2008 at around $630,000 to $650,000 per home.
For its fiscal year, the company posted net income of $35.7 million, or 22 cents per share, compared with profits of $687.2 million, or $4.17 per share, in 2006. Revenue fell 24 percent to $4.65 billion. Net signed contracts dipped 33 percent to $3.01 billion.
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