May 13 (Bloomberg) -- Toll Brothers Inc., the largest U.S. luxury-home builder, reported its eighth consecutive quarterly decline in revenue as demand for new homes tumbled.

Fiscal second-quarter homebuilding revenue fell 30 percent to $818 million from a year earlier, the Horsham, Pennsylvania- based company said today in a statement. That beat the average estimate of $741 million from analysts surveyed by Bloomberg.

New-home sales in the U.S. dropped in March to the lowest in almost 17 years as foreclosures reached a record and banks curtailed lending. The five largest builders have reported a combined $3.3 billion in net losses in their most recent quarters as declining existing-home sales have prevented some potential customers from trading up to new properties.

``The lack of demand right now is a huge challenge,'' said Dave Crossman, an analyst at Kirr Marbach & Co. in Columbus, Indiana, in an interview. ``They're hunkering down, raising liquidity, biding their time until demand returns.''

Kirr Marbach owned about 357,000 Toll shares and had $406 million under management as of March 31.

Toll had $1.23 billion in cash and $1.27 billion available under bank agreements as of April, $343 million more than at the end of the previous quarter. Toll cut its land position to 51,800 lots at the end of the quarter, 43 percent lower than its peak of 91,200 at the end of the fiscal second quarter in 2006.

Land Expenses

The company said it may incur pretax costs of as much as $375 million to write down the value of real estate, more than the $245.5 million it had last quarter.

Chief Executive Officer Robert Toll said traffic at its developments is the ``worst we've ever seen.''

``The just-completed spring selling season was quite weak in most markets as buyers remained on the sidelines,'' he said on a conference call. ``We believe there is significant pent-up demand which is growing.''

Toll was asked about whether the company had considered a ``merger of equals.''

``We have,'' Toll said. ``We haven't spent a lot of time on it. We've dipped our toes in the water. Chatted it up a little bit. So far we're very happy where we are. It's not ruled out.''

Toll gave most U.S. home markets poor grades, saying Southern California and Illinois are `F-,' Arizona an `F,' and New Jersey a `C.' He said the New York exurbs earned a grade ``B+'' and that sales in the city borough of Brooklyn have ``faded.''

Prices Sink

Customers canceled 25 percent of contracts in the three months ended April 30, the lowest rate since the same quarter a year earlier, when they withdrew from 19 percent. The net value of contracts fell 58 percent to $496 million from a year earlier. The order backlog, or homes under contract that have yet to be sold, declined 50 percent to $2.08 billion.

The average price of the net contracts was $534,000, down 26 percent from a year earlier and 7.9 percent lower than in the previous three months. The average price of the canceled contracts was $760,000 per house.

The lower sales prices were partly due to fewer sales in expensive markets such as California and Manhattan, Toll said.

Revenue fell 39 percent in Delaware, Maryland, Pennsylvania, Virginia and West Virginia and slumped 46 percent in its South region, which includes Florida. Revenue tumbled 28 percent in Arizona, California, Colorado and Nevada and slipped 3.4 percent in the region that includes New York, Illinois and New Jersey.

Rival Builders

Toll fell 23 cents to $23.14 at 2:56 p.m. in New York Stock Exchange composite trading. The shares are down 16 percent in the 12 months through yesterday, compared with a 41 percent drop in a Standard & Poor's measure of 15 home construction companies. They're up 17 percent since Jan. 1.

The company will report complete earnings on June 3.

Standard Pacific Corp. yesterday reported a first-quarter loss that was more than double analysts' estimates and said it's considering a possible sale. D.R. Horton Inc. last week reported a record $1.31 billion second-quarter loss.

New-home sales slid 8.5 percent to an annual pace of 526,000 in March, the fewest since October 1991, from a 575,000 rate the prior month, the Commerce Department said on April 24. The median sales price slumped 13, the most in nearly four decades.

Sales of previously owned homes in the U.S. fell 2 percent in March to an annual rate of 4.93 million, from 5.03 million in February, the National Association of Realtors said April 22. The median sales price fell 7.7 percent from a year earlier.

U.S. foreclosure filings more than doubled in the first quarter as payments rose for subprime adjustable mortgages and falling home prices left property owners unable to sell or refinance without losing money, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said in an April 29 report.

To contact the reporters on this story: Brian Louis in Chicago at blouis1@bloomberg.net; Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

Last Updated: May 13, 2008 15:17 EDT