Homebuilders Slide as Toll Brothers Adds Fuel to Slowdown Fears

(Bloomberg) -- Homebuilder stocks fell broadly Tuesday -- on pace for their worst decline in almost three weeks -- after Toll Brothers Inc. reported fiscal fourth-quarter orders that missed estimates and cautioned that demand from buyers slowed further last month.

The luxury builder helped lead the S&P Supercomposite Homebuilding Index down as much as 4.8 percent before paring declines. The index is on pace for its biggest drop since Nov. 15, on a closing basis, with all 15 members declining. The group has lost about 30 percent so far this year amid concerns about affordability of new homes and a slowdown in demand.

Homebuilders Slide as Toll Brothers Adds Fuel to Slowdown Fears

“We believe these results are unlikely to alter the current ‘catch a falling knife’ dynamic in the homebuilding sector based on slowing demand trends (including soft November sales),” Keefe Bruyette & Woods Inc. analyst Jade Rahmani wrote in a note to clients.

Rahmani said Toll Brothers is “more exposed to the current slowdown” based on its focus on luxury homes and strong presence in California and the New York City condo market. Toll’s orders in the quarter declined 13 percent from the prior year while KBW had expected an 8 percent rise.

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