Luxury homebuilder Toll Bros. reports $412M loss, but CEO says industry rebound will take time

Homebuilder Toll Brothers posts narrower 1Q loss

Toll Brothers Inc. said Wednesday the slow recovery of the housing market helped the luxury homebuilder post a narrower loss in its fiscal first quarter.

But CEO Robert Toll isn’t looking for a speedy or smooth recovery, saying the housing market remains in “choppy waters” even as it appears “the seas are getting calmer.”

The report of a narrower loss for Toll Brothers came as the U.S. government reported sales of new homes plunged 11.2 percent to a record low in January.

The drop was a surprise to economists who had expected sales would be stronger and injects further doubt into the stability of the housing recovery.

“The housing market took several years to recover following the downturn of the late 1980s and early 1990s,” Toll said in a statement along with Toll Brothers’ earnings report. “We expect this recovery to follow a similar pattern.”

Like other builders, Toll saw orders pick up in the spring and summer last year as low mortgage interest rates and tax incentives for homebuyers coaxed reluctant buyers back into the market. That demand began to ebb toward the end of the year, however.

The Federal Reserve is working to keep mortgage rates in the 5 percent range, but that program and the tax credits — $8,000 for new buyers and $6,500 for current owners — will end this spring.

After that, experts foresee a decline in sales the second half of the year.

Meanwhile, the backlog of foreclosures coming onto the market will continue to temper the rebound. High unemployment and tight lending standards are also keeping buyers at bay.

Toll Brothers said it lost $40.8 million, or 25 cents a share, in the three months ended in January. That compares with a loss of $88.9 million, or 55 cents a share, in the prior-year period.

Revenue declined 20 percent to $326.7 million from $409 million the year before.

Analysts polled by Thomson Reuters were expecting a loss of 35 cents a share on revenue of about $325 million.

The most recent quarter included before-tax write-downs of $33.4 million, compared with year-ago reductions of $156.6 million.

Toll Brothers sold 596 homes during the latest quarter, a 10 percent decline from the first quarter last year.

Last week, however, the builder launched its annual winter sales event. The company said more homebuyers put down deposits than any week in February since 2006.

The company, based in Horsham, Pa., took advantage of cheaper land prices and struck deals for 3,000 lots for future homes during the quarter. Toll said it could end the year with more than 210 communities around the country, up from the current 190.

Based on recent shopping activity, the company estimated it will sell between 2,100 and 2,750 homes in its fiscal year at an average price of $540,000 and $560,000.

Toll Brothers shares fell 13 cents to $18.77 in afternoon trading.

On the Net:

Toll Brothers: www.tollbrothers.com