The largest luxury homebuilder in the United States, and a major component in homebuilder exchange traded funds (ETFs), predicted a 41% drop in fourth-quarter revenue.

Toll Brothers Inc. (TOL) reported preliminary results for the quarter ended Oct. 31 showed total consolidated homebuilding revenue of about $691 million, down from $1.17 billion a year earlier, report Helen Chernikoff and Bhaswati Kukhopadhyay for Reuters.

Homebuyer confidence, traffic and demand are down to record lows, says Chief Executive Robert Toll.

Other homebuilders are feeling the pain, too. Meritage Homes Corp. (MTH) fell on Monday after an analyst downgrade to "neutral" from "buy," reports the Associated Press. The analyst said that while there were strengths in Meritage, including liquidity and lower land exposure, the housing market troubles will deepen.

Tiernan Ray for Barrons reports that bargains may be found in the broader housing market rather than the beaten up foreclosure market. The story states that the second-largest homebuilder in the nation, Pulte Homes (PHM), might be in a  position to take on the market upswing, although it is far off.

Obviously, no one knows the true direction of the housing market, so stick with what the trends are saying. At the moment, homebuilder ETFs are below their trend lines.

  • SPDR S&P Homebuilders (XHB): down 36.6% year-to-date; TOL 5.4%; Pulte is 5.7%; Meritage is 6%.

Homebuilder ETFs

  • iShares Dow Jones US Home Construction (ITB): down 39.4% year-to-date; TOL 7.1%; Pulte is 6.1%; Meritage is 6.9%.