Toll Brothers' Plunge in Orders
Signals Further Housing Woes

Luxury-home builder Toll Brothers Inc. said its net orders for new homes in the latest quarter fell 35% from a year earlier as cancellations increased, pointing to further losses in the residential housing market.

"We continue to believe that excess supply created by cancellations, speculative buyers, and overly ambitious builders; customer concerns about selling their existing homes; and a general lack of confidence are the primary impediments to our market's recovery," said Chief Executive Robert Toll.

Mr. Toll said tighter lending standards and inability to obtain mortgages as a result of the subprime crisis don't appear to be a "major factor" affecting its mostly affluent buyers. However, he said a tougher mortgage market may make it more difficult for buyers to sell their existing houses and move into a Toll house.

Toll Brothers released preliminary quarterly results ahead of its full report scheduled for Dec. 6.

Toll's chief financial officer, Joel Rassman, said that during the fiscal fourth quarter ended Oct. 31, the company saw net contracts fall 35% from a year earlier. The builder had 417 cancellations during the quarter, while net contracts totaled 656 homes. The cancellations were heavily concentrated in high-priced markets and product lines.

Home-building revenue in the fourth quarter fell 36% from the prior year to $1.17 billion, Toll said.

"We, and other reporting builders, have observed that October's activity appeared weaker than September's," Mr. Rassman said. "These trends suggest that we still have challenging times ahead, which we believe are reflected in our estimates for fourth-quarter impairments."

Mr. Rassman estimated fourth-quarter pretax write-downs of between $250 million and $450 million.

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