by Calculated Risk on 8/22/2007 11:49:00 AM

"In single-family communities, we typically do not start a home until we have a contract in place and a significant non-refundable down-payment. ...

Even with these policies, during this downturn, we have experienced a much higher rate of cancellations than at any time in our twenty-one-year history as a public company."
Bob Toll, CEO Toll Brothers, Aug 22, 2007 (emphasis added)

So even with significant non-refundable down-payments, Toll Brothers is experiencing record cancellation rates for Toll (this is 24% for Toll, below many other builders because of the larger non-refundable deposits). And this was for the period ending July 31st - so this is the "pre-turmoil" cancellation rate.

"Through our third-quarter-end [July 31st, pre-turmoil], our buyers generally were able to obtain both conforming and jumbo loans (loans over $417,000).

Nevertheless, tightening credit standards will likely shrink the pool of potential home buyers: Mortgage market liquidity issues and higher borrowing rates may impede some customers from closing, while others may find it more difficult to sell their existing homes."

Translation: "Look out below!"

"We believe that reducing new home production until the current oversupply is absorbed is a key step in bringing housing markets back into equilibrium."

Translation: "If everyone else would stop building, maybe we would be OK."

Watch for housing sales and starts to decline precipitously in the coming quarters. Yesterday, BofA analysts forecast new home sales to fall to 700K per year (SAAR). My forecast is for starts to fall to around a 1.1 million SAAR.

Update: Herb Greenberg had almost the same reaction: For Whom the Market Tolls (As in Homebuilder)