Friday, May 05, 2006

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.


Blogger grim said...

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.''

5/05/2006 06:43:00 AM  
Blogger pesche22 said...

its called denial, but he has unloaded millions of his stock.

all legal and by the rules.

5/05/2006 07:31:00 AM  
Blogger Richie said...

Yup. It's America, everyone has to blame someone except themselves. God forbid you fail on your own! No! It can't be!

I'm waiting for the Real Estate industry to blame the slowdown on Bird Flu fears.

5/05/2006 07:50:00 AM  
Blogger pesche22 said...

take out the flippers,, and this is a real disaster.

builders are finished for a while.

5/05/2006 08:17:00 AM  
Blogger pesche22 said...

50 year notes,, thats the will begin to see more of these...

refi,,, take a 50 year deal to
raise cash,,, and fit into the

5/05/2006 08:23:00 AM  
Anonymous iLoveData&Graphs said...

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.

5/05/2006 08:25:00 AM  
Blogger chicagofinance said...

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%."


5/05/2006 10:00:00 AM  
Anonymous 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.

5/05/2006 01:35:00 PM  
Anonymous Anonymous said...

Grim; On the Robert Toll comments, you had me almost on the floor with
..."The solution? Isn't it obvious? Increase supply!"


5/05/2006 01:54:00 PM  
Anonymous Anonymous said...

State of he housuing market:

5/05/2006 02:47:00 PM  
Anonymous UnRealtor said...

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."

5/05/2006 03:29:00 PM  
Anonymous Anonymous said...

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.

5/05/2006 03:53:00 PM  
Blogger jhawk92 said...

Grim, I thought we'd get more comments on this one. Toll is the poster child of the housing boom.

Chicago, great quote from Die Hard.

I quickly looked at Robert Toll's (Bruce is another story, I'll try to post a little later...) stock sales last year. It ended up being a smidge under $300 million. $296,547,556 to be exact. He did buy some back, but there's no way of knowing what the exact price was he paid. I think Chicago's right, his next big building project will be his mansion in some warm foreign country where the co. shareholders can't reach him in...

Even the analysts are getting it...most are saying "dump this turkey!"

5/05/2006 08:17:00 PM  
Blogger jhawk92 said...

sorry, meant to say since June of last year "the peak"...he also sold about $300,000,000 in 7 months prior to that...I'd say he's worth at least half a billion right now just from the stock transactions of the last 18 months...

He'll be laughing all the way to the Swiss bank he's buying...

5/05/2006 08:21:00 PM  
Blogger chicagofinance said...

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.

5/06/2006 10:07:00 PM  
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5/18/2006 04:47:00 PM  

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