Toll Brothers stock fell on Tuesday after the luxury-home builder gave weaker than expected guidance for the first quarter next year, while pointing to reports about the slowing housing market as the cause of the housing slowdown.

“In November, we saw the market soften further, which we attribute to the cumulative impact of rising interest rates and the effect on buyer sentiment of well-publicized reports of a housing slowdown,” Toll Brothers chairman and CEO Douglas Yearley said in a statement.

Media reports of a housing slowdown come as U.S. Census data shows new home sales have declined for 11 straight months.

In October, sales of newly built homes fell 12 percent year of year, even as the median price for new homes also dropped. Economists have said the drop in new home sales stems from weakened affordability across U.S. local markets. The housing market has begun showing signs of cracking this year, while realtors are saying that offers for homes have thinned out.

Toll Brothers shares fell 2.8 percent in premarket trading.

Toll Brothers beat top and bottom line estimates for its fourth-quarter earnings report. Two of the homebuilder’s key metrics, deliveries and backlog, were at the highest levels in more than a decade.

However, first quarter guidance from Toll Brothers was weaker than expected, with a deliveries range that was markedly below Wall Street’s expectation, according to FactSet.

Yearley said the company “saw similar consumer behavior beginning in late 2013, when a rapid rise in interest rates temporarily tempered buyer demand before the market regained momentum.” Known as the taper tantrum, rates jumped in 2013 when the Federal Reserve signaled a reduction of money being put into the economy, leading to a surge in mortgage rates. Home sales recovered, however, when mortgages rates fell back again.

Some economists fear this time will be different. Lawrence Yun, chief economist for the National Association of Realtors, said in November that “this time, interests rates are not going down.”

“In fact, they are probably going to increase even further,” added Yun.

Products You May Like

Articles You May Like

Elon Musk: Tesla will have all its self-driving car features by the end of the year
Here’s what to do if you can’t pay that surprise tax bill by April 15
Here are some smart money moves for long-term financial security
The next big market catalyst will be what the Fed says about its balance sheet this week
China state-run media: Any new US tariffs on Chinese goods will be ‘catastrophic’ for global stocks

Leave a Reply

Your email address will not be published. Required fields are marked *