Luxury homebuilder Toll Brothers Inc. said Wednesday demand for its homes in recent weeks has been choppy, blaming lagging consumer confidence more than the recently concluded government tax credit program for homebuyers.
In the six weeks since the start of its fiscal third quarter on May 1, the pace at which Toll has signed buyers to contracts is running slightly ahead of a year ago, not counting communities that were open last year but have since closed.
Toll had previously said deposits from homebuyers in the first three weeks of May had been running 23 percent higher than in the same period last year, while the pace at which customers visited Toll's model homes rose 11 percent.
But those positive trends reversed in the three weeks since May 26, the company said.
During that time, deposits were off about 20 percent from prior-year levels and customer traffic slowed about 3 percent.
Chief Financial Officer Joel Rassman said the choppy sales activity was largely due to waning consumer confidence amid high unemployment, uncertain financial markets and the worsening oil spill in the Gulf of Mexico.
"At the moment, consumers view the economic glass as half empty: volatile financial markets, global deficit concerns and the oil spill in the Gulf are all contributing to this gloom," Rassman said. "We believe that once the employment picture begins to brighten and the economy stabilizes, consumer confidence will improve and the housing market should begin a steadier recovery."
Builders saw sales surge this spring as buyers raced to take advantage of homebuyer tax credits of up to $8,000. Those incentives expired on April 30, although buyers with signed contracts have until June 30 to complete their purchases.
Now that the government incentives have expired, many experts project home sales will weaken at least in the near term.
Based in Horsham, Pa., Toll has operations in 20 states.
The builder signed contracts for 820 homes during its fiscal second quarter, an increase of 41 percent from a year earlier and up 56 percent from the first quarter. The builder achieved annual growth in orders despite having 21 percent fewer communities open now than it did a year ago.
The company said it typically signs fewer contracts per open community in its third quarter than it its second quarter. Therefore, it expects it will have fewer net signed contracts for the third quarter than in the second quarter.
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