Toll: Housing Slump Almost Done; Horton: Not So Fast

Includes: DHI, TOL
by: Judith Levy

Toll Brothers chairman and CEO Robert Toll said yesterday his company could "burn off" much of its excess inventory within five months if cancellation rates continue to decline, spurring hopes the housing slowdown is approaching a bottom. D.R. Horton CEO Donald J. Tomnitz, however, bluntly said yesterday that he expects 2007 to "suck" for his company and does not see a sector recovery before 2008. Over the past five weeks, Toll's order cancellations have dropped to 16% from a 36% high. If other homebuilders are seeing similar declines, it would be an encouraging sign for the overall housing market, said Toll CFO Joel Rassman. Tomnitz believes the inventory glut is too severe to allow a recovery to take place in the near term. The usually strong spring selling season will give the market a clearer sense of the state of the sector, but according to D.R. Horton Treasurer Stacey Dwyer, "this selling season is not meeting our expectations." columnist Brett Arends notes that Toll Bros 08 03 2007 Chart DR Horton 08 03 2007 Chartdespite Robert Toll's cheerful expectations, his brother Bruce has cashed out $47 million worth of Toll stock since September. "The best forward-looking indicator of all," says Arends, "may well be insider stock sales by the people who know the housing industry best."

Sources:, MarketWatch,, Reuters, Forbes, Business Wire
Commentary: D.R. Horton's Profit Falls 65%, Beats EstimatesToll Brothers: Earnings Drop 67%, Beat EstimatesToll Brothers' CEO: Housing Slowdown Is Stabilizing
Stocks/ETFs to watch: Toll Brothers, Inc. (NYSE:TOL), D.R. Horton, Inc. (NYSE:DHI). Competitors: Centex Corp. (CTX), Lennar Corp. (NYSE:LEN), Pulte Homes Inc. (NYSE:PHM). ETFs: iShares Dow Jones US Home Construction (BATS:ITB)
Conference call transcript: Toll Brothers F1Q07

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