Toll Brothers Inc., the largest U.S. luxury homebuilder, posted a loss for the fiscal first quarter as the worst housing recession in more than two decades forced the company to write down the value of developments.
The net loss in the three months ended Jan. 31 amounted to $96 million, or 61 cents a share, compared with earnings of $54.3 million, or 33 cents, a year earlier, the Horsham, Pennsylvania-based company said today in a statement. Toll was projected to report a loss of 50 cents a share.
Home prices fell in December by the most on record, deterring consumers from buying houses. Banks are tightening lending standards, making it harder for potential buyers to sell their existing houses so they can buy a Toll Brothers home. The company's first-quarter loss was the second in a row.
"Ceaseless talk of a recession continues to dampen the mood of consumers,'' Chief Executive Officer Robert Toll said in the statement. "This drumbeat, coupled with concerns over mortgages, the direction of home prices, and foreclosures, has kept pent-up demand on the sidelines.''
The results included pretax writedowns of $245.5 million, or 93 cents a share.
Toll Brothers gained $1.20, or 5.5 percent, to $23.12 in New York Stock Exchange composite trading yesterday. They're down 24 percent over the past 12 months.
"Lack of demand is what's hurting all the homebuilders right now,'' Dave Crossman, an analyst at Kirr Marbach & Co. in Columbus, Indiana, said before the results were issued. "Where they think there's no demand, they've basically stopped building,'' he said of Toll Brothers.
Crossman helps manage about $477 million in assets and Kirr Marbach owned about 378,000 Toll shares at the end of last year.
The S&P/Case-Shiller home-price index fell 9.1 percent in December from a year earlier, after a 7.7 percent drop in November. Nationwide, home prices decreased 8.9 percent in the fourth quarter from a year earlier, the biggest decline in 20 years of record-keeping.
Toll Brothers, which sold the most homes in the quarter in its Mid-Atlantic region of Delaware, Maryland, Pennsylvania, Virginia and West Virginia, was created in 1967 and first sold shares to the public in 1986. The company sells houses in 21 states including California , New York and Florida .
The company said Feb. 6 that 28 percent of its customers canceled contracts in the first quarter, down from a record 39 percent in the previous three months. The net value of contracts dropped 50 percent to $375 million from a year earlier. The order backlog, or homes under contract and yet to be sold, fell 42 percent to $2.4 billion.
The average price of the canceled homes was $770,000. The average of the net signed contracts was $580,000, up from $557,000 in the previous three months.
Rising foreclosures are adding to a glut of new and existing homes for sale, prompting consumers to hold off on purchasing homes. Bank seizures of U.S. homes almost doubled in January as property owners failed to make higher payments on adjustable-rate mortgages.
Repossessions rose 90 percent to 45,327 last month from the same period a year ago, according to RealtyTrac Inc., a seller of foreclosure statistics that has a database of more than 1 million properties. Total foreclosure filings, which include default and auction notices as well as bank seizures, increased 57 percent.