High-yield/macroeconomics (fka YIELD)

[DewDiligence]

Toll Posts Loss Amid New-Home Slowdown

http://online.wsj.com/article/SB120410739489596505.html

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By MICHAEL CORKERY and JEFF BATER
February 28, 2008

Bad news mounted in the housing sector as the Commerce Department reported weak new-home sales and Toll Brothers Inc., a large luxury-home builder, announced dismal first-quarter earnings.

New-home sales in January declined for the third month in a row, sinking to the slowest rate since early 1995, the Commerce Department reported. Toll reported a loss of $96 million, or 61 cents a share, for the quarter ended Jan. 31, saying "ceaseless talk" about a recession and falling prices were damping home-buyer confidence as the spring selling season kicked off.

"This drumbeat, coupled with concerns over mortgages and foreclosures, has kept pent-up demand on the sidelines," Robert Toll, the builder's chief executive, said during a conference call yesterday.

The bad news came just one day after the S&P/Case-Shiller national home-price index showed an 8.9% decline for the fourth quarter compared with a year earlier, the largest drop in its 20 years of data.

Toll's loss for the quarter was driven largely by its $153.3 million write-down of the value of its land inventory. The company earned $54.3 million, or 33 cents a share, in the first quarter of fiscal 2007.

Mr. Toll saw a glimmer of improvement in sales from a year ago in the markets of Naples, Fla., and Washington, D.C. But he warned that he didn't want to give the impression that "we're on the comeback trail," because many other markets remain weak.

One of the biggest challenges to builders is the glut of unsold vacant homes, which is driving down prices and weakening consumer confidence. Nationally, the inventory of new unsold homes fell to an estimated 482,000 homes at the end of January, down slightly from December, according to the Commerce Department. But, due to the slower sales rate, it would take 9.9 months to sell off the houses, up from 9.5 in December. The 9.9 months' supply is the largest in more than 26 years. A normal supply is five to six months.

Sales of new single-family homes decreased 2.8% last month to a seasonally adjusted annual rate of 588,000, the Commerce Department said. Sales tumbled 4% in December and 13.1% in November.

Regionally, new-home sales decreased 2.4% in the South, 7.6% in the Midwest and 10.3% in the Northeast. Sales rose 2.2% in the West.
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