US buyers think 'cup is half empty'

Chicago: Toll Brothers, one of the largest US builders, said it does not see any immediate signs that the downturn in the US housing market is likely to end soon.

After years of strong growth, new home sales and prices have fallen sharply as rising interest rates and steep energy prices have dampened spending by consumers.

In a conference call with analysts, Robert Toll, the company's chief executive, said he does not see any signs of a real estate rebound, as would-be buyers remain on the sidelines.

"As long as the market is concerned with not how much can I make on this investment, but how much can I lose on this investment, as long as they're looking at the cup half empty, I think the current market will continue," he said.

"Nobody wants to buy something that they think will cost less two weeks or two months later."

But Toll suggested that once the country got past Tuesday's US midterm Congressional elections, buyer psychology might improve.

"The confidence may be restored by politics," he said. "The country's unhappy, to say the least, and perhaps the unhappiness with the foreign affairs, with the domestic situation, and with the election in general presenting the choices they present, are spilling over into our market."

Toll's comments came after his company said it expects to report a 10 per cent drop in quarterly home-building revenue, and warned of continuing softness in formerly booming housing markets such as Northern California and parts of Florida.

Toll blamed the weakness in those two markets on cancellations by speculators, who had managed to get on the company's order board because of a "breakdown in discipline" by Toll's sales force.

"We don't want to be faked into building a home that is somebody's idea of an investment," he said.

Toll, a luxury home builder, also said it expects to take fourth-quarter write-downs of $50 million to $100 million on both the land it owns and has options to buy, up from a prior forecast of $4 million. The charges will reduce net earnings by 18 cents to 36 cents per share.

Fourth-quarter contracts were down 55 per cent to $709.6 million compared to the year-ago period, Toll said.

Toll Brothers' smaller rival Beazer Homes USA, which builds houses largely for first-time buyers, on Tuesday posted a 44 per cent decline in quarterly earnings and forecast profit sharply below expectations for fiscal year 2007.