(Bloomberg) – Toll Brothers Inc.'s new home orders dropped 24% in the first quarter of fiscal year, the largest annual decline recorded by the largest US luxury home builder since the real estate crisis of 2010. The company was struggling to find the move. buyers in California, who is struggling with an affordability crisis.
Analysts were expecting a decline of less than 15% in new housing contracts in the quarter, ending Jan. 31. This was the largest decline since the 27% drop in the third quarter of 2010 compared to the third quarter of 2010.
Improved margins reassured some investors, but they were based on contracts signed six or nine months ago, before the market began to cool, said Drew Reading, Bloomberg Intelligence analyst. Orders fell 62% in California, where Toll has a high concentration.
Tolls fell 3.3% and traded at $ 36.74 at 1:10 pm. in New York, down 1.4%.
"It was worse than anyone was looking for," Reading said in a phone interview. "It became very clear that the top of the market was weaker than the bottom.In December, too, the stock markets were volatile and many Toll buyers buy their homes with their investments rather than with monthly paychecks. . "
Toll Brothers is particularly vulnerable to the downturn in the housing market, which has hit the high end of the market where inventories are the largest. While mortgage rates fell, they jumped last year, revealing an accessibility problem that has accumulated over the years as prices have outpaced revenues. This is particularly serious in California, where sales are falling, making it difficult for Toll buyers to sell existing homes and buy new ones.
Alex Barron, an analyst at the Housing Research Center in El Paso, Texas, said orders in California were probably hit hard, in part because Chinese buyers were becoming scarce as China tightened control over exits of capital.
"This is not just a problem for Toll, but for anyone selling houses to the Chinese," Barron said.
The company said the non-binding booking deposits, which it had stopped reporting in previous years, indicating that it was an unreliable indicator of demand, had declined compared to the previous year. But he said last week's deposits were better.
"We attribute the decline in our first quarter contracts to a difficult comparison from one year to the next, to a current inventory shortage in some sites and to the slowdown in the industry that began in the second half of 2018, "Douglas Yearley, chief executive company, said in a statement.
(Updates with an analyst dealing with Chinese buyers from the seventh chart.)
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