Housing bubble deflating....  

redmustang91 58M  
8986 posts
5/5/2006 7:59 am

Last Read:
5/5/2006 8:00 am

Housing bubble deflating....

Those fans of real estate have to notice it is losing steam and the bubble is deflating. Another sign is the earnings of home builders, like Toll Brothers:

Toll Brothers (TOL,$30) reported that preliminary data indicated 2Q revenues rose 18% to $1.44 billion, in line with the Reuters estimate. The luxury homebuilder said its 2Q backlog rose 3% but signed contracts fell 29%. Toll Brothers cut its target for the number of homes it expects to deliver from 9,200-9,900 to 9,000-9,700 homes in fiscal 2006, the third time it has reduced its outlook since last November. Originally, Toll Brothers said it expected to deliver 10,200-10,600 homes this year.

The company said speculators are no longer fueling demand and are canceling contracts in mid-construction, placing homes recently acquired back on the market. Additional supply is also coming from other builders who built speculative homes as well as from "non-spec-buyer" cancellations. The oversupply is being aggressively discounted, which may pressure margins, and the company added that "ordinary demand has also slackened" amid worries about home prices.

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