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New-home orders decline sharply

November 08, 2006|From Bloomberg News

Home builders Toll Bros. Inc. and Beazer Homes USA Inc. said Tuesday that orders for new homes declined and customer cancellations rose as the housing slump deepened.

Toll, the largest U.S. luxury home builder, said fiscal fourth-quarter home building revenue fell 10% and orders tumbled 58%. Beazer, the seventh-largest home builder by revenue, said orders dropped 58%.

"We continue to look for signs that a recovery is imminent but can't say that one is in sight," said Robert Toll, chief executive of Toll Bros. Buyers have lost confidence in the home market and are delaying purchases, convinced that prices will continue to fall, he said.

Toll's home building sales declined to $1.81 billion in the three months that ended Oct. 31 from $2.01 billion a year earlier, the Horsham, Pa.-based company said. Toll cut its forecast for the number of houses it plans to build in the next year and is also reevaluating plans to acquire additional land for subdivisions.

The home builders' reports coincided with a two-week, $1.3-million newspaper ad campaign by the National Assn. of Realtors to persuade people that now is a good time to buy a home.

Toll, the sixth-largest home builder by revenue, said it would complete 6,300 to 7,300 homes in the current fiscal year, less than its previous forecast in August of 7,000 to 8,000, because of cancellations and fewer contracts.

The value of contracts signed fell 55% to $710 million in the quarter, down from a $1.59-billion record in the same period a year ago. The company said the contract signings were hurt by a "higher than normal 585 cancellations." Almost 25% of the cancellations came in the Orlando, Fla., and Northern California markets, Toll said.

During the quarter, Toll Bros. sold 2,502 homes, compared with 2,957 houses last year.

Net income at Atlanta-based Beazer fell to $91.9 million, or $2.19 a share, from $164.4 million, or $3.61, a year earlier. Revenue rose 3.8% to $1.9 billion in the quarter ended Sept. 30, the company said in a statement.

Also on Tuesday, Hovnanian Enterprises Inc., New Jersey's largest home builder, said new contracts for its fiscal fourth quarter dropped 36% to 3,100, reflecting a "continued high level of contract cancellations." Cancellations for the quarter were 35% of gross contracts, up from 25% a year earlier.

Shares of Toll Bros. fell a penny to $28.04 while Beazer rose 13 cents to $42.07 and Hovanian fell 57 cents to $29.04.

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