Toll Brothers Inc (NYSE: TOL) fell in Tuesday trading, on reporting its first fall in quarterly orders in more than four years, hit by rising interest rates and higher home prices.
Toll's results are the latest evidence of slowing housing demand, after years of steady recovery following the housing crash of 2007-2008.
The housing market has been a weak spot in a robust U.S. economy, with economists blaming the sluggish trend on rising mortgage rates, which have combined with higher prices, to make home purchase unaffordable for potential buyers.
Sales of new U.S. single-family homes plunged to a more than 2-1/2-year low in October due to sharp declines across regions.
Toll, whose homes can cost upwards of $2 million, said orders, a key indicator of future revenue, dropped 13.3% to 1,715 units in the quarter ended Oct. 31, against the 6.5% rise expected by analysts.
Orders fell the most in California, Toll's biggest market by revenue, declining 39.4% to 226 units in the quarter.
Said CEO Douglas Yearley, in reference to the California market, "Significant price appreciation over the past few years, fewer foreign buyers in certain communities, and the impact of rising interest rates, all contributed to this slowdown.”
Pennsylvania-based Toll Brothers said its net income rose to $311 million, or $2.08 per share, in the quarter, beating analysts' estimate of $1.83 per share.
Revenue surged 21.1% to $2.46 billion, above the Wall Street's expectation of $2.35 billion.
Toll Brothers shares descended $2.64, or 7.9%, to $30.89
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