The company's average delivered price for the fiscal quarter was $658,000, below the range of guidance, which was $665,000 to $675,000. The drop "was a result of the mix sold, not due to incentives," said CFO Joel Rassman.

Markets that worsened during the quarter include Massachusetts, suburban New Jersey, the Poconos and Raleigh, NC. "Vegas and Reno have worsened considerably," Toll said, citing Colorado too. In ranking areas of Florida, which worsened earlier, he gave the Orlando area an "F for flunk; Florida East a flunk minus" and ranked Jacksonville D+ with an F- for Tampa and the state's West Coast.

Toll reiterated his belief in growing pent-up demand, based on demographics, the economy and employment data, but said "hesitant customers remain on the sidelines, unsure of whether home prices have bottomed. Traffic was the lowest ever" during the opening weeks of the most recent quarter, he said.

"With the uncertainties roiling in the mortgage market right now, the pace of home sales could slow even further until the credit markets settle down," Toll cautioned. Of Toll's buyers, 9.3% pay cash, 73% use fixed-rate loans and just 1% of mortgages are categorized as subprime.

As of July 31, Rassman said the company has more than $700 million in cash and more than $1.1 billion available in its bank credit facility. "No major debt is due before 2011," he added. "We believe we are well-positioned to weather the current lowdown and take advantage of opportunities that may arise."

Toll Brothers' shares have experienced a big swing on the NYSE over the past 52 weeks with a high of $35.64 per share Feb. 2 and a low of $18.85 a share Aug. 1. Yesterday, company shares closed at $24.33 per share, up 6% for the day.