Luxury home builder Toll Bros. Inc. Tuesday slashed its forecast for home sales for the second time in three months, driving its shares down as much as 4 percent, as first-quarter new orders fell 29 percent on slumping demand.
Toll is widely seen as a bellwether for the U.S. housing market. Its deteriorating forecasts may indicate that the slowing U.S. housing market is eroding faster than previously thought, Raymond James and Associates analyst Rick Murray said.
“This would seem to indicate that those trends have not reversed course, and perhaps have even accelerated to the downside,” Murray said.
That was echoed by a forecast Tuesday from the National Association of Realtors that predicted new home sales would fall 8.5 percent in 2006 and existing homes sales, which comprise about 85 percent of the overall U.S. housing market, would decline about 4.7 percent.
The outlooks by Toll and the trade association group helped drive down the home building sector, as reflected by the Dow Jones U.S. Home Construction Index, a wide barometer of home building stock activity, which was down 2.3 percent in afternoon trading.
Toll said it expects to close on sales of 9,200 to 9,900 homes in the fiscal year, ending Oct. 31, down from a previously lowered view of 9,500 to 10,200 homes. It attributed its revision to slowing demand and delays obtaining inspections, certificates of occupancy and utility hookups.
New orders during the quarter fell to 1,572 from 2,209, while the value of the contracts declined 21 percent to $1.16 billion.
First-quarter revenue, which accounts for homes built and sold and typically reflects orders taken about a year earlier, rose 35 percent from a year ago, to $1.33 billion. Analysts on average had forecast total revenue of $1.35 billion, according to Reuters Estimates.
The company ended the quarter with a backlog of 8,635 homes contracted and awaiting construction at a value of $5.95 billion, up 22 percent.
“Demand at our communities, which began to soften in early September, now appears to be improving, although demand pressure from speculators has certainly passed,” Chief Executive Robert Toll said in a statement.
Toll Brothers rattled the market in November when it first cut its forecast. Since then its shares, which were down 3 percent, or 94 cents, to $30.26 in early afternoon trading on the New York Stock Exchange, are off 23.2 percent. In contrast, the Dow Jones U.S. Home Construction Index has fallen 4.9 percent, its lowest level in about three months.