Surprise me, homebuilders!

Toll Cancellations Drop; Horton to Miss Projections (Update6)

By Brian Louis and Sharon L. Crenson

March 7 (Bloomberg) -- Toll Brothers Inc., the biggest U.S. luxury-home builder, said customer cancellations are falling and it's offering fewer sales incentives. D.R. Horton Inc., the second-largest builder by revenue, said it will miss its projections for closings this year.

D.R. Horton said closings will likely drop below last year's 53,000 and it will probably continue writing down land through 2008.

``I don't want to be too sophisticated here, but 2007 is going to suck, all 12 months of the calendar year,'' D.R. Horton Chief Executive Officer Donald Tomnitz said at a Citigroup Inc. conference in New York. ``Our future is not as bright as what we would like it to be.''

A yearlong U.S. housing slump has left homebuilders with a glut of unsold homes as customers have abandoned deals or held off making purchases. Sales in 2006 fell 17 percent, the most since 1990, cutting profit at home construction companies and spurring them to write off lost deposits and land purchases.

At Toll, the cancellation level has dropped to 16 percent in the last five weeks from a high of 36 percent, CEO Robert Toll said today at the conference.

Burning Off Inventory

``We're now running at half the pace of inventory that we had three or four months ago,'' Toll said. ``So I would guess, and that's all it is, it'll be another four or five months before you finally burn off inventory in most of the markets.

After predicting that the home market was nearing a ``bottom'' in December, Toll last month reversed course as deposits failed to live up to expectations. Today, he tempered his comments by saying the market ``is still beset by speculation'' and that it may take longer in some areas to pare the number of unsold properties.

``We believe that as soon as the market turns, and I'll speak about it, we think it'll turn with a vengeance,'' Toll said. ``The incentives are coming down.''

It's ``remarkable that we still have speculative investment going on,'' he said.

Horsham, Pennsylvania-based Toll Brothers has raised prices in 15 of its communities and has trimmed incentives, Toll said.

Shares of Toll Brothers rose 44 cents to $29.24 at 4 p.m. in New York Stock Exchange composite trading. The stock slid 12 percent in the year through yesterday. Fort Worth, Texas-based D.R. Horton rose 30 cents to $24.86. The stock dropped 24 percent in the year through yesterday.

The Federal Reserve today said ``almost all districts reported that housing markets remained weak,'' according to the regional survey known as the Beige Book for the color of its cover.

The only exceptions were New York and New Jersey, which reported ``some stabilization in the market for new homes,'' and New York City's apartment market, which saw ``strong demand,'' said the report, based on information collected through Feb. 26.

Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aZYONcrN26wQ&refer=home

No comment, just a big LOL at D R Horton CEO. CNBC said the market sold off because of his comment. Another big LOL from me.