Toll Brothers Loss Will Be Yours, Too


The CEO of luxury homebuilder Toll Brothers has an explanation of his company's dismal fourth quarter earnings: even its well-heeled customers have a bad attitude about buying real estate. "We believe it may take some time for Americans to regain confidence in our economy, their job status and the benefits of home ownership," Chief Executive Officer Robert I. Toll told shareholders in his report.

Toll's losses widened significantly over last year's -- to $755.8 million for its fiscal year ended Oct. 31 -- and the company is taking more than $85 million in writedowns on land and developments. The Horsham, Pennsylvania-based builder expects to sell as few as 2,000 homes in the coming fiscal year, down from nearly 8,800 in 2005. Many houses and condos that are still selling have seen big price cuts.

But for Toll and other big builders that have come to dominate the new home market in many regions, plummeting land prices are good news. For one, it presents an opportunity to buy prime locations cheap. Toll has $1.8 billion cash on hand, more than it did last year, and is jumping on bargain land that less well-financed builders couldn't afford to hold on to.