Upscale Builder Toll Says Buyers Are 'Hiding'

If you weren't out shopping for a fancy new McMansion last month, you weren't alone.

Although the housing downturn has been most severe at the low end of the market, even high-end home builders like Toll Brothers are suffering like never before. The builder of behemoth homes saw its revenues drop by 22 percent last quarter to a mere $842.7 million—its seventh consecutive quarterly decline.

While Toll says it doesn't start pounding nails before securing a hefty deposit, like other builders, it has been hit with skyrocketing cancellations—$198 million worth last quarter—and a backlog of orders that has fallen by nearly half over the past year.

Buyers of high-priced homes "seem to be hiding," chief executive Roger Toll said in a statement that suggested that even price declines averaging 13 percent weren't helping the company move inventory. "Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel."

Analysts have long argued that "Toll needs to lower prices more aggressively near-term to regain volume and work through its long land supply," as Banc of America Securities analyst Daniel Oppenheim wrote in a research note today.

Indeed, with more and more high-priced homes going into foreclosure—putting further downward pressure on prices—and a slew of mortgage interest-rate resets still in the offing, Roger Toll has plenty of reason to worry that any light at the end of the tunnel may, in fact, be that of the oncoming foreclosure train.