Major Home Builder: Housing Market Downturn Worse than Feared

While confusion over mortgage rates has some real estate insider concerned, a significant drop in profits has one home builder worried.

Toll Brothers Inc. is estimating that it will take a fiscal first-quarter writedown of $60 million to $160 million amid a dampened housing market. It had earlier projected taking $60 million for the entire fiscal year.

The Horsham, Pa., company said it was hurt by cancellations and steep declines in revenues, backlog and signed contracts for the quarter that ended Jan. 31. Preliminary results show revenue of $1.09 billion, a 19 percent drop from the same period a year ago.

Backlog is down 30 percent to $4.15 billion and contracts, at 1,027 units, are down 33 percent. It’s all a result of mortgage applicants waiting for prices to fall before agreeing on any deals.

The company said it is monitoring several markets for potential write-downs.

The company did offer some signs of encouragement that the housing bust has hit bottom.

Robert I. Toll, chairman and chief executive officer, said in a statement that the pace of cancellations is starting to abate and that there was an uptick in demand for mortgage loans in the first week of this month in some markets.

However, Toll said, it was considered seasonal and expected. Spring is the most popular time of the year for home sales typically.