Toll Brothers, Inc. (NYSE/TOL), the largest U.S. builder of new luxury homes, reported yesterday that its third quarter profit had fallen by 85%. The total loss for the biggest U.S. homebuilders in the last quarter surpassed $2.0 billion.
I was very interested to hear what CEO Robert Toll said yesterday about the housing market because it was simple, clear talk… much of which with I agree.
Here’s what Toll said:
— The tightening credit market (thanks to the subprime problems) is reducing the number of potential home buyers.
— A glut of resale home and new home inventory is acting to reduce demand for new home construction.
— Because of all the bad news surrounding the housing market, any potential buyers are taking the “let’s see what happens” attitude, waiting for lower prices ahead.
To Toll’s comments, I like to add: 179,599 homeowners received notices of default in July from the mortgage companies — a huge 93% increase from July 2006.
All indications are that the poor housing market in the United States is snowballing to the bad side.
I personally expect the next couple of years to be terrible for U.S. housing sales, foreclosures and the construction market. These events will dampen the U.S. economic picture significantly in the months ahead, leading to the recession I am predicting for the U.S. economy later this year, early 2008.