House-sales slump taking a toll on Toll

first_imgPHILADELPHIA – Hopes of an imminent housing recovery are dimming as the nation’s largest homebuilders continue to report slumping sales and profits. Toll Brothers Inc., the nation’s largest builder of luxury homes, on Wednesday warned that it won’t meet prior earnings projections. Homebuilders Hovnanian Enterprises Inc., Pulte Homes Inc. and D.R. Horton Inc. have reported similar malaise. Toll Brothers has projects in Moorpark and Chatsworth; Hovnanian in Granada Hills and the Santa Clarita and Antelope valleys, Pulte in The Antelope Valley and D.R. Horton in Sylmar, the Antelope Valley and Ventura County. Toll placed part of the blame on stricter lending requirements that have been tough on prospective buyers who want to upgrade but can’t sell their current homes because of problems in subprime mortgages. Subprime mortgages had helped drive housing demand at the tail end of the boom, from 2005 through last year. But as defaults rose, lenders started pulling back on the easy loans. “Lenders are being more circumspect,” Chen said. She expects housing prices to fall by 3.6 percent this year and 2.9 percent next year. It helps that the economy is still generating jobs, she said. Interest rates should also remain stable. Last week, the average 30-year mortgage rate was 6.16 percent, with 0.5 percent in fees and points, Freddie Mac reported. On Tuesday, the National Association of Realtors lowered its projections for sales of previously owned homes to 6.29 million this year, a decline of 2.9 percent. The median price is forecast to dip 1 percent to $219,800 this year, but to rebound 1.4 percent in 2008. The group anticipates new-home sales of 864,000 in 2007 and 936,000 next year, down from the 1.05 million last year. The median new-home sales price is forecast to remain unchanged at $246,400 in 2007 and then gain 2.2 percent next year. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! “Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets,” Toll’s chief executive officer, Robert Toll, said in a written statement. The problems in subprime mortgages for borrowers with poor credit histories have choked early indications of a recovery in the housing market. Toll Brothers said it still expects to post a profit for the second quarter. Its full earnings report will be released on May 24. “If we hadn’t seen the problem in the subprime market, the spring selling season might have been a little bit more buoyant,” said Celia Chen, director of housing economics at Moody’s Economy.com. “Some of the indicators were stabilizing earlier in the year, and now I think the outlook has weakened.” The delinquency rate in subprime first mortgages rose to 22.4 percent in the first quarter after bottoming at 18.5 percent at the end of 2003, according to data collected by Equifax and Economy.com. last_img read more