US Housing Stocks Tumble on Toll Brothers Warning (TOL)

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Luxury home builder Toll Brothers reduced its forecast for home sales in 2006, as new orders for the first quarter fell 29% to 1,572 on slumping demand. TOL is a bellwether for the US housing market. The lower forecasts may indicate that the US housing market may be declining faster than previously thought.

TOL rattled the market in November when it first cut its forecast to a range of 9,500 to 10,200 from 10,200 and 10,600. Since then, Toll shares are down 25 percent. In contrast, the Dow Jones US Home Construction Index -- a wide barometer of home building stock activity -- is down 4.8 percent. The DJ Home construction index fell to its lowest level in 3-months, and might be forming a "Head and Shoulders Top" pattern:

The National Assoc of US Realtors said its index of pending home sales dropped in December to the lowest point in almost two years. The NAR predicted sales of new homes should fall 8.5% to 1.17 million units from a 2005 record of 1.28 million.