Toll Brothers, builder of luxury homes, reports 85% profit decline in worsening housing slump

Toll Brothers Inc., the largest U.S. luxury homebuilder, said third-quarter profit fell 85 percent as the deepening housing slump cut sales, increased cancellations and forced the company to write down property.

Chief Executive Officer Robert Toll said the company had a higher rate of cancellations than at any time in its 21-year history as a public company. Five of the largest U.S. homebuilders reported combined losses of $1.85 billion and took charges of $2.9 billion to write down land values and walk away from property options in their most recent quarters.

On Wednesday, Moody's Investors Service said it may reduce the credit ratings on the debt of Pulte Homes Inc., the third-largest U.S. homebuilder, to junk, and will also consider downgrading Lennar Homes Corp., the second-largest homebuilder, and Centex Corp., the fourth-largest.

During a Wednesday conference call with analysts, Toll said the housing market hasn't stabilized. "Traffic is pretty stinky out there," Toll said. The company also refused to provide fourth-quarter earnings guidance citing uncertainties surrounding sales, mortgages and possible future charges.