Andrew Clark – The Guardian August 23, 2007
America's top builder of luxury homes has revealed that cancellations are at an all-time high as a crisis gripping the property market widens to the country's most affluent homebuyers.
Toll Holdings' news came as hundreds more jobs were cut by several mortgage lenders, including HSBC, which is closing a lending office with 600 staff in Indiana.
Although the property slump originated in the much less affluent sub-prime sector, Pennsylvania-based Toll Holdings made it clear that its speciality of gated estates, golf communities and waterside developments was suffering.
Toll's profits collapsed by 85% to $26.5m (£13.3m) in the three months to June and new home contracts fell 17% to 1,457.
Its chairman, Robert Toll, said cancellations were at a "much higher rate" than at any time in its 21 years as a public company. "We continue to wrestle with the interrelated challenges of softer demand and excess housing supply," he said. "Tightening credit standards will likely shrink the pool of potential homebuyers."
As the crisis deepened, a San Diego sub-prime lending specialist, Accredited Home Lenders Holdings, became the latest US mortgage firm to halt new loans. It said its workforce was likely to be cut from its June level of 2,600 to just 1,000.
Its chairman, James Konrath, said: "These difficult decisions were made out of necessity in light of the continued and widely publicised turbulence in the mortgage and financial markets, but with a heavy heart."
Before the problems arose, Accredited agreed to a $400m takeover by a private equity firm, Lone Star, which now wants out of the deal. Accredited is suing in an attempt to force the buyout through.
Elsewhere, HSBC blamed declining demand for home loans for the closure of its mortgage services unit in Carmel, Indiana. "It's really about matching up our production capacity with business volumes," said a spokesman for HSBC, which admitted in February that its Household division in America faced sub-prime liabilities of $11bn. Some of the Indiana site's staff will be transferred within the company, while others will be made redundant. HSBC has 60,000 employees in America.
Meanwhile, General Motors revealed it was eliminating overtime at six car factories in the US, Canada and Mexico. It said demand for sports utility vehicles was down, in part due to the weak housing market.
The Fed's hint on Tuesday that it might cut interest rates appeared yesterday to have stabilised world markets.
Last updated 13/12/2007