A reader comments on Toll Brothers' (TOL) call for the federal government to take a more active role in aiding the nation's housing market, including reduced mortgage rates and fees and a buyer tax credit.
This would be priceless humor if not for the situation - a tax credit for the luxury home buyer? Welfare for the McMansion set? Who to bail out first, this guy or the Cerberus guys and their friends in Detroit that bought a lousy auto maker during a bubble? Will there be a retroactive tax credit for homeowners that lived within their means and aren't subject to foreclosure, or does the credit just go to the financially irresponsible?
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Here's the original news story:
Toll Bros 4Q Rev Slumps 41%; Climate Worsened In October
By Kevin Kingsbury
Toll Brothers Inc. (TOL) reported fiscal fourth-quarter building revenue declined 41% as the luxury home builder said the recent worsening of the economic financial crisis wreaked havoc on its business.
"Unfortunately, the preliminary signs of stability we had discussed in early September...were upended by the past month's financial crisis," said Chairman and Chief Executive Robert Toll. The resulting blowback - including job-loss fears, slumping consumer spending and the stock-market plunge - pushed up cancellations sharply and resulted in record-low traffic and demand.
Toll reiterated his stance that the federal government needs to take a more active role in shoring up the nation's housing market by stopping the decline in home prices. To do that, he recommended Congress cut mortgage rates and fees and enact a buyer tax credit.
Homebuilding revenue, essentially all of Toll Brothers' revenue, dropped to $691 million in the quarter ended Oct. 31. Analysts surveyed by Thomson Reuters projected $655 million.
The company's backlog fell 54% in dollar terms, while net signed contracts dropped 27%.
Toll Brothers has been cutting back its number of developments as home sales have slumped the past several years. The figure as of Oct. 31 was 273, down from 315 a year earlier, and the number of communities being developed is expected to fall to 255 or less by the end of the new fiscal year.
The company added that while it hasn't completed its review, pretax write-downs on land and joint ventures for the latest quarter should range between $120 million and $220 million. Builders have taken billions in write-downs the past several years from walking away from land they were in position to buy and revaluing property already purchased.
But in the end, Toll expects the shakeup impacting the industry to ultimately help his business. As smaller players have increasingly difficult time getting credit access, some will go out of business. "We believe this less crowded playing field, combined with attractive long-term demographics, will reward those well-capitalized builders who can persevere through the current challenging environment."
Toll Brothers shares closed Monday at $18.95, and there was no premarket trading.