LOWER DEMAND TAKES TOLL ON HOUSING MARKET

New York Post- New York, N.Y.

November 9, 2005

Author: Sam Gustin

Luxury homebuilder Toll Brothers Inc. said yesterday that it will build hundreds fewer new homes in 2006 than previously forecast - the latest indicator that the U.S. real estate market is slowing down.

The news rattled investors, who drove Toll shares down nearly 14 percent from $39.41 to $33.91, and dragged down the Dow Jones U.S. Home Construction Index, a broad measure of home building stocks, by about 7 percent.

"Without question the housing market and home prices have reached their peak," said Greg Gieber, an analyst at A.G. Edwards. "The question now is whether the market is going to fall out of bed or make an orderly retreat." "I'm of the 'orderly retreat' school," Gieber said.

Toll Chairman and CEO Robert I. Toll said, "It appears we may be entering a period of more moderate home price increases, more typical of the past decade than the past two years." Toll said demand was softening in several markets as home buyers take longer to decide to buy. Hurricane damage and record gas prices have shaken their confidence in the past two months. Toll said it expects to sell 9,500 to 10,200 units in the 2006 fiscal year, which ends next October, down from a previous forecast of 10,200 to 10,600 units.

"If Toll Brothers is saying the bloom is off the rose in the luxury housing market - that's bad," said Joshua Kahr, a real estate development professor at Columbia University. "I would expect that by sometime in 2006 it should be clear to everyone that the froth of the bubble is gone," he added.

Toll's reduced outlook for new home sales came even as the company reported that preliminary fourth-quarter revenues grew 39 percent to a record $2.01 billion. Still, it's the latest in a series of indications that the housing bubble is ending.

Still, it's the latest in a series of indications that the housing bubble is ending. Last month, the Commerce Dept. reported that the median price of a new home fell 5.7 percent in September to $215,700 from $228,800 in August, the largest decline since January 2003. The Commerce Dept. also said that September new home sales were down 0.1 percent compared to one year earlier and that houses are staying on the market longer before being sold.

Earlier in October, National Association of Home Builders Chief Economist David Seiders said that housing activity should begin to flatten in the first part of 2006, as the Federal Reserve continues to increase interest rates, already at 16-month highs.

TOLL BROTHERS stock chart

Close $33.91

-$5.50

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