Tuesday, November 08, 2005


Here's the way the story was played at SmartMoney.com:
A CRACK in the housing market's fancy facade nailed the building trade Tuesday.

Luxury home builder Toll Brothers (TOL: 35.15, -4.26, -10.8%) rattled homeowners and equity investors alike by lowering expectations for the coming year. Deliveries could fall up to 700 homes short of the prior forecast for at least 10,200.
Here's the most recent update from Bloomberg News:
Toll Brothers Inc., the largest U.S. builder of luxury homes, reduced next year's sales forecast, saying the housing market is weakening after a five-year boom.

Its sales forecast was cut by a range of 3.8 percent to 6.9 percent because of ``some softening of demand'' and delays in opening new communities, the Horsham, Pennsylvania-based company said today in a statement. Its shares dropped as much as 14 percent, the most in seven years, and rivals including Pulte Homes Inc. and D.R. Horton Inc. also fell.

Rising interest rates are starting to curb home sales, which have hit new highs each year since 2001. The boom has been the main driver of the U.S. economy, accounting for 50 percent of growth and more than half of private payroll jobs created in the past five years, according to a report by Merrill Lynch & Co. earlier this year.

``There are two schools of thought here, and one is that there's a housing bubble and it's going to break severely,'' said Seth Glickenhaus, senior partner at Glickenhaus & Co., which holds shares of Pulte, Centex Corp. and D.R. Horton. The other believes ``demand is pretty great and the correction won't be significant. I'm in the latter group.''

Homebuilding stocks had fallen 18 percent since their peak in late July on concern that sales and prices were headed lower. Today, the Standard & Poor's Supercomposite Homebuilding Index of 16 builders lost 55.12, or 6.3 percent, to 821.77 at 11:40 a.m. New York time.
Read the entire story at this link.

— The Boy in the Big Housing Bubble