Toll Brothers' October Surprise

The credit crunch means a longer slump for housing.

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It looks like October's massive upheaval in the credit markets will continue to pressure the housing market as home prices continue to fall and builders' revenue drops.

Toll Brothers' fourth-quarter revenue sank 41 percent to $691 million from a year ago as cancellations heated up. Via Bloomberg:

``Unfortunately, the preliminary signs of stability we had discussed in early September were upended by the past month's financial crisis, Chief Executive Officer Robert Toll said in the statement. Credit market disruption and falling stock prices have helped drive ``home-buyer confidence and our traffic and demand down to record lows.

Problems at Toll and other homebuilders aren't going away, even with lots of investors eyeing their cheap multiples and several (failed) mini-rallies in the sector over the past few weeks.

Toll's cash flows tightened again during October after stabilizing a bit the month prior, with net cash flows shrinking by more than half to $128 million from the prior quarter, according to Goldman Sachs. Like other troubled companies, Toll called for government assistance.

Strategist Brian Belski of Merrill Lynch warned this week that homebuilder stocks are still pricier than during the last housing downturn in the early 90s, and that this bust is worse.

The wait for a bottom continues.