"Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets. Although there is variation among markets, our traffic this quarter on average has been flat on a gross basis and down approximately 20% on a per community basis compared to last year's second quarter," Toll says. "Still, "we expect to report a profit for our second quarter."

The cancellation rate did decline for the quarter with 384 cancellations, which was 19% of total signed contracts, compared to 436 cancellations, or 30% of signed contracts, in the first quarter of the fiscal year, Toll says. Still, the numbers are higher than the 9% cancellation rate in the same quarter in the fiscal year 2006. The bulk of the cancellations, 70%, were from contracts signed more than nine months ago. Some of the major reasons for why people cancel are a change in location or job or family problems, CFO Joel Rassman 17% could not sell their existing home, 16% had a change in job, change in location or family problems and 22% would not give a reason or they were investors. Additionally, 12% of contracts were canceled by Toll because of permitting issues or a "backlog," Rassman says.

Although cancellation rates are down, so are orders for new homes. "March seemed slower to us than February and April was slower than March. So, it seemed to us that we were not getting better," Toll says. The company has stopped building spec single-family, or detached, homes. "We are not building homes that are not sold except to finish those where we have had cancellations [and] except for multi-family communities," Toll says.