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Cancellations Thump Toll Brothers

Luxury-home builder Toll Brothers (TOL - Get Report) said revenue fell 36% in its latest quarter, as cancellations of home contracts continue to plague the company.

Toll reported preliminary revenue of $1.17 billion for its fiscal fourth quarter, down from $1.81 billion a year earlier. New contracts for the quarter ended Oct. 31 fell 35% to 656 units, including the impact of cancellations.

"We continue to believe that excess supply created by cancellations, speculative buyers, and overly ambitious builders; customer concerns about selling their existing homes; and a general lack of confidence are the primary impediments to our market's recovery," Robert Toll, the company's chairman and CEO, said in a statement.

Like other homebuilders, Toll said the market got worse in October.

Many builders have pointed to stricter mortgage-lending standards in the wake of this summer's credit market meltdown as a reason for the weakening climate. While Toll's wealthy customers don't face as much of a lending issue, it could have an indirect impact on its results.

"An inability to obtain mortgages does not appear to be a major factor for our buyers, although it may affect our buyers' buyers," Toll said.

As orders remain weak and housing prices come under pressure, inventory impairment charges continue to mount in the homebuilding industry. Toll said it expects pretax writedowns of $250 million to $450 million in the quarter.

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