New Home Orders Drop
From Reuters:
Toll Brothers 2nd-Qtr Home Orders Fall 33% on Demand
Toll Brothers Inc., the largest U.S. builder of luxury houses, said fiscal second-quarter orders fell 33 percent as customers waited to see whether a glut of homes on the market would lead to lower prices.
Orders for the period ended April 30 fell to 2,076 from 3,120 a year earlier, Horsham, Pennsylvania-based Toll said today in a statement. It was the second consecutive decline following 10 quarters of increases for the builder, whose homes cost triple the national average.
Rising mortgage rates and record prices have chilled demand at the height of the so-called spring selling season, traditionally the busiest time for builders. Hovnanian Enterprises Inc., the largest builder in New Jersey, said on May 1 that orders for the quarter ended April 30 plunged 20 percent.
...
``We believe the excess supply on the market is a short-term phenomenon,'' Robert Toll, the company's chairman and chief executive officer, said in the statement.
The number of homes on the market increased as investors tried to sell properties or canceled contracts in mid- construction, the executive said. Prices on these speculative homes were being ``aggressively discounted,'' he said.
...
Demand from ordinary buyers eased because of ``worries about the direction of home prices,'' he said.
The company's cancellation rate in the quarter was 8.5 percent, compared with its historic average of 7 percent, Toll said.
Toll Brothers 2nd-Qtr Home Orders Fall 33% on Demand
Toll Brothers Inc., the largest U.S. builder of luxury houses, said fiscal second-quarter orders fell 33 percent as customers waited to see whether a glut of homes on the market would lead to lower prices.
Orders for the period ended April 30 fell to 2,076 from 3,120 a year earlier, Horsham, Pennsylvania-based Toll said today in a statement. It was the second consecutive decline following 10 quarters of increases for the builder, whose homes cost triple the national average.
Rising mortgage rates and record prices have chilled demand at the height of the so-called spring selling season, traditionally the busiest time for builders. Hovnanian Enterprises Inc., the largest builder in New Jersey, said on May 1 that orders for the quarter ended April 30 plunged 20 percent.
...
``We believe the excess supply on the market is a short-term phenomenon,'' Robert Toll, the company's chairman and chief executive officer, said in the statement.
The number of homes on the market increased as investors tried to sell properties or canceled contracts in mid- construction, the executive said. Prices on these speculative homes were being ``aggressively discounted,'' he said.
...
Demand from ordinary buyers eased because of ``worries about the direction of home prices,'' he said.
The company's cancellation rate in the quarter was 8.5 percent, compared with its historic average of 7 percent, Toll said.
10 Comments:
Robert Toll thinks this is the problem:
Robert I. Toll, chairman and chief executive officer, stated: ``We are entering our ninth month of slower sales in most of our markets. Looking at the market in general, I offer the following comments: Speculative buyers are no longer fueling demand; instead they're putting the homes they've recently acquired back on the market or are canceling contracts in mid-construction. Additional supply is also coming from speculative homes started by other builders, as well as from their ''non-spec-buyer`` cancellations. Much of the oversupply described above is now being aggressively discounted by others. Generally we do not sell to speculators nor build spec homes, but we have certainly been impacted by the overall increase in supply.
The solution? Isn't it obvious? Increase supply!
``We expect to partially offset softer demand with an increasing community count. Over the next six months, we expect to open approximately 80 new communities while closing approximately 60; we project to end FY 2006 with approximately 295 selling communities compared to 230 at FYE 2005. Newer communities generally offer greater choice, shorter delivery times and, historically, greater value appreciation for our customers, which we believe will help increase our sales. Based on our community count and strong land position, we continue to look to the future with cautious optimism.''
http://biz.yahoo.com/pz/060505/98605.html
I am hoping this will also flood the market with load of handy man that will be able to do some home remodeling projects when I buy my home later.
Toll introduced these dynamic elements in the February calls.
He is correct.
The company also happens to be well run from an operations perspective.
What is the spin? Underplaying the magnitude of the changes in prices, and also the absolute dollars that will be lost on these large dollar purchases.
He knows what he is doing, but he also has the dispassionate view of a veteran who has been through real estate markets cycle at least 3 times in 30 years.
Also, he can act similar to most i-bankers. I-bankers get paid in cash. Toll sold just an inoridnate amount of stock in 2005 at inflated prices, and to quote "Hans Gruber" from Die Hard, at this point once everyone realizes what happened, he'll be "...sitting on a beach earning 20%."
chicago
Chicago, have you read either of these books?
Financial Self Defense, by Charles Givens
The Richest Man in Babylon, by George Clason
They seem highly recommended.
Grim; On the Robert Toll comments, you had me almost on the floor with
..."The solution? Isn't it obvious? Increase supply!"
thanks
State of he housuing market:
http://tinyurl.com/zpnx8
More listings with "Open House!" again for the coming weekend.
Since some here have been Boycotting Open Houses the past few months, I've noticed prices are dropping. Conicidence? I think not. :)
Some recent price drops:
MLS 2261656 - $300,000 price drop
MLS 2261641 - $40,000 price drop
MLS 2268702 - $50,000 price drop
MLS 2259341 - $75,000 price drop
MLS 2253723 - $50,000 price drop
MLS 2268017 - $60,000 price drop
MLS 2246790 - $55,000 price drop
MLS 2268671 - $30,000 price drop
That first listing is telling, that house closed at $1.3M in June, and now it's for sale at a $300K loss. Still no takers on that "bargain."
I called on a new listing this week and after hearing the price, I told the realtor it was way too much and declined to go see it. Maybe calling and letting realtors/sellers know they are overpriced, along with the open house boycott will be a wake up call.
UnRealtor said...
Chicago, have you read either of these books?
Financial Self Defense, by Charles Givens
The Richest Man in Babylon, by George Clason
They seem highly recommended.
2:35 PM
Haven't read either, but these titles are on a widely disseminated reading list that is distributed among people I know.
I support any advice that extols the benefits of questioning the current widely accepted logic in a meaningful way in the name of achieving better results.
Allow me to add that people shouldn't get wrapped up in making money per se. People should really be focused on understanding who they are and what makes them happy. Prioritize their lives accordingly, and then set goals that they want to achieve over a certain period of time. Finance, investing and consuming are merely tools to use to this end.
Once you know what you want, you can observe your current situation, and make the best strategic decisions with your tools about how to get from where you are, to where you eventually want to be.
If you are that organized, it allows you to make much more rational decisions.
I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
the indexes easily.
Take a look at Wallstreetwinnersonline.com
RickJ
Post a Comment
<< Home