Cooling Housing Market Drops the Stock Market

The nation's biggest builder of "tract mansions" today reported that orders for new homes fell 29 percent in the first quarter, signaling significant cooling of the housing market.

Toll Brothers, a Pennsylvania-based builder that is very active in the Washington region, reported record sales for last year but warned that the market has already turned for the kind of houses it builds.

The average new Toll Brothers house sells for more than $700,000 -- almost three times the national average.

Toll stock, which has been slipping steadily in response to rising interest rates during the past few months, fell more than a dollar a share to a two-year low.

Shares of other builders fell as well as the entire market retreated. A slowdown in new home sales bodes badly for consumer spending and retail sales, because homebuyers typically spend thousands of dollars furnishing and decorating their new places.

The Dow Jones industrial average fell 49 points to 10,749.76.

The Nasdaq Stock Market composite index dropped 14 points to 2,244.96.

The Standard & Poor's 500 stock index lost 10 points, closing at 1,254.78.

General Motors was another of the day's big losers, falling after the announcement that GM is giving a 50 percent pay cut to its chief executive and its shareholders.

GM will save more than $500 million by cutting the dividend on its common stock from $2 per share, per year to $1.

Chief Executive G. Richard Wagoner will take a 50 percent pay cut, his three top lieutenants will be paid 30 percent less this year and no top executives will get bonuses for 2005, the company said. Wagoner earned about $2.2 million in 2004 plus a bonus of $2.5 million.