Meanwhile, in luxury homebuilder land, Toll reported a loss of $97 million or 59 cents a share. Although the bulk of Toll's losses were related to charges against its inventory of land (they actually made $81 million selling houses), net contracts dropped by 58% from a year ago. Frankly, I could care less if these numbers met or exceeded analysts estimates. They are still losing gobs of money, writing down inventory, and seeing steep declines in contracts signed. When that stabilizes, call me. Otherwise, I remain a bear on the homebuilders.
In a conference call with analysts, Toll stated that Congress should offer would-be homebuyers a tax incentive to buy a new home, claiming that this should be a much larger priority than bailing out mortgage lenders and homeowners currently facing foreclosure. It you set aside the the fact that it is an obvious self-interested plea for help from Congress, it is an interesting idea, although I would present a different twist. It is true that home prices will never hit bottom until the enormous inventory build-up is reduced, particularly in areas where a significant number of homes on the market are foreclosed properties. What I would suggest to Congress is that they offer a tax incentive for purchases of foreclosed properties. This would give potential homebuyers as well as investors an incentive to clean up the backlog of foreclosed properties. The incentives would be skewed to more credit-worthy homebuyers and liquid investors (presumably because you can no longer get a loan otherwise), thus rewarding prudence, rather than the foolhardy spending of the bubble years. Maybe then, when the cheaper alternatives disappear, people will return to the new home market to buy a home from the homebuilders. That is, of course, assuming they're still around...
