HORSHAM, PA-During its final fiscal first-quarter 2006 conference call, Toll Brothers executives reiterated the caution expressed in a preliminary first-quarter report and in those dating back to third-quarter 2005. This time, however, chairman and CEO Robert Toll sees light. “In 2005, demand for new homes in many markets was propelled to unsustainable levels by speculative buying,” he said yesterday during the call. “We’re on the other side of that slope. Speculative demand has ceased, and speculators are now putting their homes back on the market. The result has been more supply than demand in some regions.”

He cited metro Washington, DC in particular as one of several markets, “that are sound economically but will need to work through their excess supply before the imbalance once again tips in our favor.” As for his own company, he added, “sales remain constrained at the many communities we have with backlogs of 12 months or more. We are optimistic that as these backlogs are reduced and new communities are opened, sales should improve.”

For the quarter ended Jan. 31, net income for the locally based national homebuilder rose 49% to $163.9 million and revenues were up 35% to nearly $1.4 billion, compared with the same quarter the previous year. For the most recent quarter, the company’s backlog rose 22% to almost $6 billion, but signed contracts declined 21% to just above $1.1 billion.

It is on the basis of this data and precautionary signals Toll has been announcing since late 2005 that the company reduced its sales expectations by 300 homes for this year. Its 2006 guidance now calls for sales of between 9,200 and 9,900 new homes this year. While lower than anticipated at midyear 2005, the current 2006 projection exceeds the 8,769 homes sold by Toll in fiscal ’05.

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