Good afternoon. At this time I would like to welcome everyone to the Toll Brothers fourth quarter earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. Robert Toll, Chairman and CEO of Toll Brothers; please go ahead sir.

Welcome everybody and thank you for joining us. With me today are Joel Rassman, Chief Financial Officer; Fred Cooper, Senior Vice President of Finance and Investor Relations; Joe Sicree, Chief Accounting Officer; [Peter Macaren], Chief Marketing Officer; Don Salmon, President of TBI Mortgage Co.; and Greg Zeigler, Vice President of Finance. Before I begin, I ask you to read the statement on forward-looking information in today's release and on our website. I caution you that many statements on this call are based on assumptions about the economy, world events, housing and financial markets, and many other factors beyond our control that could significantly affect future results. Those listening on the web can e-mail questions to rtoll@tollbrothersinc.com. We’ll try and answer as many as we can. Today we reported final results for our fourth quarter and fiscal year ended October 31, 2008. Since the release has been posted on our website I will just touch on the key results. In fiscal year 2008 fourth quarter we had a net loss of $78.8 million or $0.49 per share diluted which included pre-tax write-downs totaling $175.9 million. This compared to fiscal year 2007 fourth quarter net loss of $81.8 million or $0.52 per share diluted which included pre-tax write-downs totaling $314.9 million. Excluding write-downs fiscal year 2008 fourth quarter earnings were $38.5 million or $0.23 per share diluted compared to fiscal year 2007 fourth quarter earnings of $118.2 million or $0.72 per share diluted. For the full fiscal year 2008 we reported a net loss of $297.8 million or $1.88 per share diluted which included pre-tax write-downs totaling $848.9 million. This compared to fiscal year 2007 full year net income of $35.7 million or $0.22 per share diluted which included pre-tax write-downs of $687.7 million. Excluding write-downs fiscal year 2008 12-month earnings were…

Thank you Robert, fourth quarter homebuilding cost of sales as a percentage of traditional homebuilding revenues before interest and write-downs was 76.6%, slightly higher then 2008 third quarter of 76.5%. Fourth quarter interest expense was 3.1% of revenues, 20 basis points higher then 2008 third quarter principally a result of inventory turning less quickly and less average inventory under construction over which to spread these interest costs; a trend which is likely to continue. Fourth quarter pre-tax write-downs were $175.9 million which included $106.2 million attributable to communities or land owned, $54.4 million attributable to joint ventures, $12.1 million attributable to [options] as we continued to reevaluate, renegotiate, and in other ways reduce [option] costs; and $3.2 million attributable to writing off the remaining goodwill associated with the two prior acquisitions. More then 80% of the fourth quarter write-downs were in the north and the west. Fourth quarter SG&A was $96.8 million, approximately 13.9% of revenues, compared to $103.1 million approximately 13.9% of revenues in the third quarter and $120.5 million approximately [$10.3 million] of revenues in the fourth quarter of 2007. Fourth quarter other income was $19.9 million including approximately $7 million of retained deposits and $7.5 million of interest income. The effective tax benefit rate was 25.7% for the fourth quarter and 36.2% for the year. When income is negative in a quarter small changes in state allocations or small changes in estimated audit settlements can have a disproportionate effect on the effective tax rates. The average number of shares used to calculate earnings per share was approximately 159.7 million shares for the three months and 158.7 million shares for the year. The creation of projections is difficult at any time. In the current climate it is particularly difficult to provide guidance given the numerous uncertainties related to…

Thanks Joel, as we look to the future we see reduced competition from the small and mid size private builders who are our primary competitors in the luxury market. Their access to capital already appears to be severely constrained. We envision that in the future there will be fewer and more selective lenders serving our industry. Those lenders will likely gravitate to the homebuilding companies that offer them the greatest security, the strongest balance sheets, and the broadest array of potential business opportunities. We believe a less crowded playing field combined with attractive long-term demographics will reward those well-capitalized builders who can persevere through the current challenging environment. We thank our shareholders, suppliers, and contractors who have been alongside us during this difficult year. Most of all we thank our coworkers, the tremendously hardworking and dedicated Toll Brothers team across the United States for their great efforts. At this point we’ll turn it over for questions.

(Operator Instructions) Your first question comes from the line of David Goldberg - UBS

In the press release and in your comments you talked about seeing some high quality land come back on the market and not yet at attractive prices, so I guess the question is who are the sellers of the land that you’re seeing and what would have to happen either to home prices or to the offering prices on that land to make it more attractive to you.

The offerers are banks. In both cases I have two deals in mind that came recently and I think we’re not that far apart on price. We need some terms which will make it less risky for us and of course with the terms it will be less expensive as well.

At the pace that you are selling now and with the expectation of 2,000 to 3,000 deliveries in fiscal 2009 do you think you can continue to be free cash flow positive and if so how much sensitivity is there within that should the sales pace fall, should you not be able to hit the 2,000-delivery mark.

It’s a hard question to answer as we’ve talked about in the past. When we do our modeling we always end up starting the year saying we’re not going to be cash flow positive and end up the year over the last few years, being cash flow positive. We continually change our business plan during the year as we match production and sales. So we would think that absence write-downs we have a good chance of being cash flow positive because we have in the last few years but at this point I can’t tell you for sure.

Your next question comes from the line of Rob Stevenson – Fox-Pitt Kelton Rob Stevenson – Fox-Pitt Kelton: Can you talk a bit about the jumbo mortgage market and what you’re being able to offer your buyers these days and what you’re expecting given that the 10-year treasury is down around 2.6 and the 30-year for conventional is down under 5.5.

We’re down under 5.5 but I want to give an opportunity to Don Salmon head of TBI Mortgage to answer these questions.

The good news is we see real glimmers of hope on the jumbo market. We just struck a deal with a major bank to supply jumbo financing for some of our condo products. We’re having terrific conversations with banks. We’re about to we think consummate a deal with a major life insurance company and we see liquidity is coming back into the market, slowly but surely, but it sure is coming back. Today on a conforming we’re at 5% and zero points. On the jumbo we are at 5 7/8 and zero points and we think those are terrific rates for consumers today. Those are on fixed rate product by the way. Rob Stevenson – Fox-Pitt Kelton: And that’s the rate that you’re able to give to buyers without having Toll Brothers absorb any cost as a concession?

There are no concessions going on the [HUD 1] for those rates. Those are the rates that we are offering to buyers as a regular course of business.

However rest assured that I’ve told the sales staff that through this weekend we don’t want to go quoting 0.5%, we’ll quote 4.95%. We’ll buy it down bps. It would be idiotic not to for marketing purposes.

Right, we’re putting the final touches on that right now. That should cost us virtually nothing. Rob Stevenson – Fox-Pitt Kelton: Last time we saw unemployment hitting into the high single-digit into the low double-digits was the early 80s, if we’re going towards that level what’s from an operating standpoint do you wind up changing in the business model versus where you’re sitting today.

Well implicit I think in the question is an assumption that home sales go south so stop me if I’m wrong, but I think what you just said is if business continues to get worse, how do you change your operations and I think the answer is you continue to cut overhead, continue to renegotiate options, continue to shrink the number of communities, you continue to shrink the amount of improvements that you would put into your land. You hunker down and wait for the storm to blow over. Rob Stevenson – Fox-Pitt Kelton: But there’s no fundamental difference in how you would operate if I told you unemployment was going to peak at 8% versus unemployment was going to peak at 10% during this recession.

No I think you just go with the flow and 8% I would assume we do less business then we’re doing at 6.5% or 7%, wherever the number is today. And you would shrink your overheads and conserve your cash accordingly. The deals that you would take would be tougher for you to take. I said that wrong. The deals that you would take would be of a higher threshold.

Your next question comes from the line of Ivy Zelman - Zelman & Associates Ivy Zelman - Zelman & Associates: Maybe we could just chat a bit more on the mortgage front, down payment, FICO scores on the 5% and the 5 7/8, can you give us those two please for any differential between FICO and down payment for the standard jumbo that’s getting 5 7/8, can I get it if I‘m a 580 credit score or obviously its going to be 700 plus.

We can do, on the conforming side the 5%, hopefully soon to be 4.95, we can do 95% financing for most buyers. There are some areas where that’s a little constrained in declining markets and that credit score generally would be in the 640 maybe 650 range. So we think that fits most buyers, certainly most of our buyers. On the jumbo side its typically 10% down. Again in declining markets it might be a little bit constrained from there and again credit scores in the 660 to 680 range. Ivy Zelman - Zelman & Associates: What about the condo market which is jumbo condo?

Jumbo condo as we just opened up 90% jumbo condo for New York City and for Hoboken and we think we’re about to open up 90% jumbo condos across the board.

The average delivered credit score right now is 753. Our average LTV is 68.72%. Ivy Zelman - Zelman & Associates: So people are not putting down 10, they’re putting down 30 you’re saying.

That’s been our history too, our average LTV for years has been in the 70% range. Ivy Zelman - Zelman & Associates: You have this new required use rule that is going into effect in January that HUD just passed on November 14 which would limit the use of the mortgage company’s ability to incentivize and also control the mortgage process and there’s obviously some concern on that, your comments and thoughts please.

We don’t think its going to effect us to any great degree. We don’t tie incentives as a general rule now. We have about two communities in the country where we’re doing it today so we don’t think its going to have a major impact on the way we do business. Ivy Zelman - Zelman & Associates: You guys are in again always the enviable position with such a great capitalized balance sheet yet you sit on so much land and I realize that you’re in, let’s just assume that there’s a lot of land and that land we know you haven’t written it to zero and at some point there will be value there again some day. I guess I’m just trying to understand how do you monetize that land in an efficient, friendly, shareholder way when you’re now looking to accumulate new land and the question is if you’re trying to buy land you’re trying to reload at pennies on the dollar and get great returns, but you’re going to be just plagued with this large amount of land that’s going to hurt your returns because it used to be Toll Brothers in 90, 91, you wrote all these big checks and you said, you went in the RTC and it was a lot of fun, and you and all the boys had a great time because you were the only game in town and you were able to buy and reload, but now you’ve got maybe the ability to reload but you’re sitting on this burden of huge amount of land so that your returns are going to be negatively impacted for a long period of time so if I’m a shareholder and I’m looking at your stock and say okay the book is $20 do I put an ROE of what on that because maybe Toll won’t see an ROE better then 10% because they have all this land their plagued with.

All the land that we have we certainly examine every quarter very closely. If its operating land we have to write it down so as to permit us to make 10% on a GAAP basis. Joel Rassman That’s not true. It ends up with having a GAAP of much more then 10%--

--by contribution to G&A right. So we have to write it down in order to permit ourselves to make, I don’t know what the number—

--it’s a discounted cash flow and I don’t give out what the, it runs all over the place.

We are not operating on, we also examine every quarter and in effect do our best to mark it to market, bring it down. Unfortunately we never get to bring it up. But we bring it down according to GAAP accounting principals. Ivy Zelman - Zelman & Associates: I realize you’re writing land down but you’re certainly not writing it down to levels that in many cases, as you’ve told me, there’s undeveloped land out there that’s theoretically negative residual value and you laughed and said there’s no such thing as negative residual value, land has got value and I’ll buy it myself for 10Gs. The point is is that at some point you’re going to have to put improvements in the ground and bring those lots to finished lots and so that’s going to negatively impact the returns when you have to do that even if you’ve written it down to $0.50 on the dollar or $0.30 on the dollar, I’m just trying to understand—

You may be right, I can’t follow it. If I’ve written it, in fact I’ve found three deals we did write down to zero. The ground is certainly worth more then zero and when we improve it, if we haven’t already and I don’t recall how many were improved of the three and how many weren’t improved, but when we improve it we hope that we’re improving it get ourselves our normalized return. Otherwise we’ll continue to let it sit if especially since its paid for.

Your next question comes from the line of Dan Oppenheim - Credit Suisse

I was wondering if you can talk a bit about the northeast market or 42% of the backlog seems to be in the north, how much of that is the New York, New Jersey metro area and can you give us a bit of color on that.

I think most of it is Massachusetts, not much. Connecticut is for this market doing okay. The rest of the market I would say is pretty much [inaudible].

The backlog is broken out in detail in the releases and in the 10-K. I think you’d be better off looking at that. It tells you by region what we have.

We know its 42% in the north, wondering how much of that specifically is the New York metro of that 42%.

I don’t know that we have details more then we do in our public filings.

Your next question comes from the line of Kenneth Zener - Macquarie Research Equities

I’m interested, I guess its related also to the regional exposure of backlog given the broad operating margin differences where the north and the mid Atlantic is roughly in the mid 15% currently and the south and west is about 3%. How much of your profit view this or in 2009 is really defined by the mix that you have because obviously you said on your business in the south and west you’d be a lot more profitable even though you have stale assets in the other segments.

I don’t think I can answer the question because I haven’t broken it out that way and we don’t give out detailed projections but in general the mid Atlantic area and the northeast area have been more profitable then the south and the mid west. But with write-downs, take into account write-downs and in fact that may no longer be true.

The west is rough right now, it stinks now but when its hot it gets real hot. At least it has in the past.

Another angle is if the Federal, the latest Federal action actually reduces mortgage rates down to it seems to be a 4.5% range, how would that as a real estate buyer, how would that change your evaluation of land deals because obviously to the extent it is a better markets, its more a valuable asset. Could you perhaps quantify how that—

You don’t value land on a tickertape kind of experience because 10-year treasuries have gone from 4 down to 2.6, land doesn’t go up [inaudible]. It would be very foolish to do that. The way you value land stays the same which is you take a valuation off what you think you can sell homes for. Now to the extent that we stayed at a 4.5% mortgage rate for a long period of time which would (a) create demand and (b) create therefore rise in prices, the builder/developer would have to make a judgment as to whether he thought this was it permanently and value land as worth more because obviously everything is cheaper if its being purchased at a 4.5% rate versus a 7% rate. Or the developer/builder would sit on the sideline and say I’m not going to buy land based upon what I’m able to sell houses at with a 4.5% rate because I expect the rate will go back to the norm of the last 20, 25 years which has been I think about 8, 8.5%.

And the reason I ask that is that although equity investors don’t treat, making a direct call on the land they obviously seem to be somewhat positively responding to these actions out of the government so it seems to be that perhaps there’s a disconnect in your view based on—

I don’t know, if the equity purchaser you’re talking about is a homebuyer, I think it makes a lot of sense. If the equity purchaser is a land fund, call them, I can’t help you.

Your next question comes from the line of Nishu Sood - Deutsche Bank

Since the announcement that the original plans for TARP are off the table a couple of weeks ago, have you found that this has brought any of the banks back to the bargaining table?

No we don’t see any connection. I don’t think the REO departments operate in connection with announcements of the Treasury or the Fed to help troubled banks as opposed to troubled assets. I don’t think you’re going to see a direct connection there.

On those two land deals that you mentioned, how close are you to actually completing those two deals?

As close as the sellers want us to be. Not close until they say yes.

More of a housekeeping question, what was the benefit to COGS from prior [inaudible] this quarter?

It’s $29 million.

I have a question from Michael Kessler at Barclays Capital, can you tell me how many specs you currently have and if possible the breakdown between finished and unfinished specs. We count a spec at the point where we drop lumber and we don’t keep track of them differentiating between those that just have lumber, those that have a roof, those that are closed in, and those that are finished so I can’t give you that. On our specs, on the ordinary communities, on single-family jobs we have 527 specs which means homes with lumber. I would say probably all but 10 or 11 of those became specs when people walked away from their contracts and since we have about 275 communities operating now, you’re about two per community on average for those singles.

Your next question comes from the line of Josh Levan - Citigroup

Over the past few months have you run specials where you’ve sponsored a material buy down of mortgage rates and if so how much of those buy down specials had in bringing on additional buyers?

No we haven’t had special buy down mortgage promotions, when we buy down a mortgage we pretty much permanently put it, well not permanently, but we put it into play for a period of time that is generally a couple of months. We don’t buy down a mortgage for a week. We haven’t done any recently, no because the rates have been fairly low recently so there’s been no reason to buy down.

Who’s the marginal buyer of a Toll home these days, is it somebody who has to move because of personal circumstances, or is it somebody who voluntarily wants to trade up into a Toll home?

For the most part it’s the latter. I remember speaking to one of our sales managers, I said, Yvonne, you don’t seem to have the traffic necessary to develop the deposits, what can I project out of the community and Yvonne said, well that’s the case, but I’m working on two people and its not a matter of whether they’re going to buy, they are definitely going to buy. Its just a matter of how long it takes me to push them over the line. So that pretty much sums up the average Toll Brothers, the most numerous Toll Brothers kind of client, and the short answer was the latter.

If the Treasury comes out and actually officially adopts this plan and rates were lowered to 4.5% and I know this is hard to answer but what would be guess best before how long it would take for the lower rates to translate to increased traffic and sales.

I think that it depends on the marketing of those rates by the government. The builders of course will jump up and down and logically will argue the greatest rates since the Second World War which they would be, but I think you still have to overcome the lack of confidence. If I come to you and that’s what has the entire economy seized right now, not just for homebuyers but for stock analysts, hedge fund operators, mutual fund operators, etc. we are all under the log right now, we’re scared. So I think it very much depends on how its marketed which is why I emphasized if government came forward with an increased tax credit program in conjunction with this lowered mortgage rate and said we are clearly calling the bottom. If you have the inclination to buy a new home, have the credit rating to enable yourself to do it, and have the capital for a down payment to permit you to do it, if you don’t do it now you are crazy. If they call the bottom there is a good chance that we get this economy rolling again because I believe the economy is stopped, clogged, due to the non ability of the price, all the mortgage-backed securities and CMDSs that are out there. But unfortunately I can’t give you a direct answer to the question, I can only give you what I’ve just done.

Your next question comes from the line of Michael Rehaut - JPMorgan

This might be tough to answer but I do know that you monitor traffic and orders pretty frequent, I believe weekly, if you have in fact seen any type of pick up in traffic and orders in the past week, Thanksgiving weekend I guess, long weekend, given that the rates started to come down a couple of days before Thanksgiving.

No.

So no noticeable difference there?

Correct.

Is Thanksgiving a weekend that you would get some level of traffic?

No Thanksgiving is traditionally one of the deadest weekends of the year. Its up there with Christmas and New Year’s. There’s three dead weeks, Thanksgiving, Christmas and New Year’s.

You had mentioned that you started to see a little bit of liquidity coming back into the market and that you were getting close to signing a deal or two and one was with a life insurance company, so that doesn’t necessarily seem a traditional route in terms of securing financing. I would assume that more traditionally it might come from the banks and money centers and just wondering if that is the case and you’re saying some liquidity is coming back, but what are your level of discussions with the more traditional banks, are they just not as much a part of the picture right now in terms of participating in some of these facilities.

With the banks we’re seeing more targeted and localized activity. Banks are getting smarter about their business policies and actually going after customers as opposed to going after assets and that’s one of the real advantages that we have that our customer is highly attractive to these banks because for the most part, they’re affluent people. In terms of more traditional, life companies have traditionally been buyers of mortgage-backed securities and mortgage bonds. This particular company I think is getting smarter because they are buying directly from the high quality producers so they know exactly what’s in the assets that they’re buying as opposed to the nebulous MBSs that were out there in the past.

When you had answered a question earlier about FICO scores and LTVs that you were able to offer a conforming at only 5% down and a 640, 650 FICO, that doesn’t jive as much as what we’ve generally been hearing in terms of the availability of credit particularly at those types of rates and I was wondering if and certainly your average customer doesn’t necessarily fit that type of profile, I was wondering how often that actually occurs that you do have that situation where a 650 or 640 FICO needs only to put 5% down to get that type of rate for your type of home.

Generally it’s the first time homebuyers who are looking for the higher leverage and often they’re also the ones with the lower credit scores. So if you look at some of the entry level condo communities for example, those would be the ones that are looking for that type of financing, and the fact is that FHA is very attractive to those folks because its only 3.5% down and their credit parameters are much more relaxed then those of the MIs.

How much of FHA do you do actually?

We’re just beginning to do a fair amount of FHA, I think by the end of the year we have eight or 10 FHA loans closing and if you look at over the last five years we might have closed three in those entire five years. This year for the entire fiscal year we might close 20 of them but we expect that piece of the business to grow next year.

So growing but still you’re talking about 1% or something in that order.

It helps us move some marginal units to people who couldn’t get in under the current conventional parameters and we’re thrilled to have it but its not something that we think is going to be a major part of our business going forward.

I have a question from Jim Meyer, over the next several years as your business hopefully returns to normal how will the structure of your balance sheet differ from what it was in the early 90s? Who remembers what the balance sheet was in the early 90s?

We probably had leverage around 45%, maybe 50%.

That’s all? Oh yes, because we were coming out of bad times. Will you still buy and develop land in the same manner you did in the past? The answer is yes but we have to selectively pick that period of the past, we hope it isn’t the recent past. Will you change the way you handle land? Again we hope to handle land the way we did when we were enjoying profits as opposed to getting kicked as we are recently. Will your future leverage ratios be different then what they were five years ago? I hope that they go up. Nothing the matter with 40%, that would mean I’m back in business. Yes, I would think that would be about where we want to be, about where we were five years ago.

The high point was 53 when we were booming and growing at 100% a year. So I guess 40—

In the 40s, right and that would make the most sense. Maybe the question should be have you learned any long-term lessons through this housing crisis? Yes of course we’ve learned some lessons. Although I swore we learned these lessons in 88, 89, 90 but apparently they didn’t sink in. We hope that this time they do. Thank you Jim. I have questions from James Grouse. Please answer one or more of the following if you could. Why would you imply that Toll is looking to acquire assets but they are priced too high and yet Toll hasn’t devalued its own assets? We have devalued our own assets.

--$1.676 billion since the start of the write-offs, $1.676 billion.

Now that includes however predevelopment costs. That includes everything so we haven’t devalued our assets $1.676 billion but I’ll bet its about $1.5 billion and the rest are options walked away from or predevelopments. Why buy more when your own future is so unclear? We hoped our future wasn’t so unclear and we hope you’re wrong about that, but if you’re right and we’re wrong and I can’t say more then that. Clearly the government does want to make cheap mortgage money available to folks buying homes over $500,000. How would this program benefit Toll?

Incentive our buyers, our jumbo conforming into a conforming so—

Obviously if they make the mortgage cheaper and they make the mortgage money higher that’s going to benefit America’s luxury homebuilder. Our buyers have to sell their own home so that helps them buy our homes, right. With rising unemployment and slowing economy, tighter lending restrictions and the government playing every card and then some to prop up the economy, where are the new Toll buyers going to come from? We’ve been in this down market for three and a third years, the difference this time is that this has been a much more severe downturn. So much so that we are at risk of entering a depression and I think the government and the congress and most out there recognize that, and if we’re going to make a mistake we’re certainly going to make it on the side of over priming the pump rather then under priming the it because when a pump is under primed you get no water out of the pump. If its over primed, you just get the water that much faster with more volume. Our buyers are going to come from where they’ve always come from, the demographics haven’t stopped. People haven’t stopped moving to the United States. Quite a bit of wealth has been accumulated over the last five to 10 years and still is, although we’ve all gotten slaughtered in the last 10 weeks, so we’re going to need some return of that equity to the market, and some return of confidence to our clients.

Your next question comes from the line of Stephen East - Pali Capital

Going back to mortgages again, what percentage of your total deliveries are Fannie Freddie conforming in all ways not just jumbo conforming but below the cut off?

A little over 80% of total deliveries qualify for sale in Fannie Mae. Combined right?

No without the jumbos.

I don’t have the number in front of me but I’m going to speculate it at over 75%.

Along those lines, I know we haven’t seen all the details of the Treasury plan but is it your interpretation that jumbo conforming would probably fit the program and get the low 4.5% rate?

I don’t know the answer to that. There hasn’t been anything that I have read that’s addressed that.

Okay.

Logic tells you that they’ll probably do what they’ve done in the past which is buy what the GSEs put out so to the extent that GSEs put out 625s as agency jumbos, they’ll back the mortgage up to 625.

I hope the logic holds because so far it seems to confound them on that. If we look at land spend for 2009 I know in the last conference call you said we have a lot of, we don’t know what the number is going to be because there may be some opportunistic purchases and you just talked about a couple of them, if we ignore that and what you need to take down and what you need to develop to get between 2 and 3,000 units delivered and 255 communities, what do you think your land and development spend in 2009 would be?

The land to those deliveries we already own and there’ll be some improvement costs that may have to go in for the deliveries at the last half of the year but, on some communities, I don’t know what the number is but for the 2 to 3,000 range we already own that land and its primarily approved.

Earlier the conversation about you have a significant amount of land and if you go and take advantage of these opportunities that you see your returns could really be depressed for a long time, I guess I want to come back and revisit that because I think the fear out on the street is is that you have a significant amount of land that’s enough to last you for years even in a good growth scenario. The more you bring on, something has to give either you delay bringing the current land that you own to market or the land that you just bought is very far out in the future before you monetize it—

There’s a third possibility. The third possibility is that we’ve evaluated, that we can sell in the current market, depressed as it is, at enough of a price, at enough of a pace, to make a very good or acceptable return on that new land acquired.

And when you look at potential big purchases that are coming along do you look at it from the perspective of hey, we already have this land, if we bring this on we will have issues with running this off and it will really compress our returns or do you not look at it that way.

We look at it every way that we can of course.

Your next question comes from the line of Carl Reichardt – Wachovia Carl Reichardt – Wachovia : Could you break out the owned versus option lots?

About 80% is owned and 20% is option so about 32,000. Carl Reichardt – Wachovia : I wanted to ask you your thoughts about the entry-level market and how that recovery will relate to the recovery and kind of the move up luxury markets. Do you think that those segments can all recover at the same time or do you think that we’ll need to see a recovery in the entry level market before we can really see the move up in the luxury market recover?

We hope the latter is not the case but there’s a good logical argument for it. Certainly there will be a concentration on the entry-level markets by the congress, the Treasury and the Fed to a certain extent. There always is. In the past if its any indication of the future, the luxury market has recovered right along with the entry level market and we would think that would be the case this time as well.

Your next question comes from the line of [Josh Hamby – Artamiss] [Josh Hamby – Artamiss] : I was hoping we could revisit the undeveloped land that you’re currently not operating on, can you discuss a little bit your methodology for how you’re marking those assets. I’m assuming you’re not marking them as if you were just going to blow them out as [tracks] to other developers.

Well that’s correct.

We do the same process that we do for operating communities which is that we look to see when those communities will be open for sale. We estimate the selling price of those units and the pace based on today’s information with whatever changes need to be made to that and then we, if it doesn’t recover its costs we then present value its cash flows down to a write-off. Obviously the longer out it is for a job to start and finish the bigger the potential write-down is on that piece of ground and when you then start selling it the potentially bigger margin you would have when you start to sell. [Josh Hamby – Artamiss] : That’s really my question because obviously there’s a lot of sensitivity to when you develop and sell and I wanted to know do you, are these conservative assumptions in your view as to when, basically the plugs that you’re using to calculate the values of this undeveloped land, are you feeling you’re conservative or what’s realistic or—

We believe we are reasonably conservative but within reason. We don’t want to take write-downs to zero when the land is worth [money]. [Josh Hamby – Artamiss] : Q1 since the end of Q4 can you discuss a little bit your pace of sales and signed contracts and expected profit margins on those deals based on what you’re seeing.

I don’t think so. [Josh Hamby – Artamiss] : On share price, can you, I’d love to hear if you feel the market is fairly valuing your shares and if not, if you are planning on any selling?

I don’t think we do care to answer that question. We don’t opine on whether we think the price of the stock is fair.

Your next question comes from the line of James McCanless – FTN Midwest Securities James McCanless – FTN Midwest Securities: I wanted to ask if the mortgage liquidity that we’re seeing right now is not a flash in the pan and that rates stay down etc. is there any thought to potentially expanding the product mix, making it a little bit richer mix i.e. more higher end single family units rather then attached or anything of that nature?

No not really. We look at every opportunity opportunistically and try and set [inaudible] up, buy the land up for the highest and best use, for the highest return and that wouldn’t vary on a planned basis, strategic basis. It varies on the basis of what we think is the best opportunity for the land. James McCanless – FTN Midwest Securities: I also wanted to find out I think you made reference to in the commentary or on the release about more competitors falling out, are you still seeing the competitive field, the small and mid size builders continue to see people falling out in that market? Is it beginning to be more clear?

Yes, unfortunately and fortunately that is the case.

Your next question comes from the line of Alex Barron - Agency Trading Group

I wanted to ask you about your impairments, I think about a quarter or so ago you said you had about 15,000 or so finished lots, and I was just wondering how many of those lots have been impaired and how many of the undeveloped lots have been impaired?

I haven’t got that info for you, I’m sorry.

We don’t do it that way. Each community is looked at separately and some communities you have both finished, improved and unimproved lots and they would both be impaired and we don’t break it out that way.

How about if you just tell me then how many, what percent of your communities have been impaired at least once?

One hundred and eight-five communities have been impaired at least once.

On joint ventures, I guess this quarter you took a $54 million or so write-down but your investment and the balance sheet seem to have gone up sequentially so can you elaborate on what’s happening there and where you took those JV impairments this quarter.

We won’t elaborate other then the region where we took write-offs but we did have a new joint venture that we entered into where we owned some land and a land bank owned some land and we combined the two together into a joint venture. So that land came from land owned and went into a joint venture as compared to just stated land owned. There was no new cash that went out, it was just an asset we moved to a different classification.

So it was owned and then it went to a JV?

Right.

Okay and you said you could or couldn’t elaborate on the geography where you took the write-down.

We gave you that it was the north and the west. I don’t think we’re going to go into individual states. We made a determination to keep our disclosure to what’s public in that area.

What was the benefit from impairments to gross margins this quarter.

We just said, about $29 million was the estimate that we recovered into the gross margin line that were previous impairments.

Your next question comes from the line of Douglas Kass - Seabreeze Partners

I was struck by a number in the release, the average selling price of your cancelled units in the fourth quarter rose from 606,000 in the third quarter to 785,000, my question was was there any concentration with regard to community exposure or regional exposure in those high priced cancelled units.

If you looked in the disclosure I think you see its in the north, the higher priced communities in the north and the west that caused us—

I remember it as being the west. We have to address this question, you didn’t want to waste time on the call, but looking at fourth quarter 2008 preliminary release of 11/11 you said you had 46,000 lots owned and optioned at fiscal year 2008, today’s release puts the same at 39,800, what is the difference between these numbers. The difference in these numbers is—

We thought we had renegotiated a number of options to levels that we would be willing to stay in the options. It is now our estimate that it is less probable that we will ever close on those deals although they’re still under option.

We may but I thought it was at a point where we would tell ourselves and those who are negotiating with us that these are not our lots. We paid our price and we default our deposits and these lots are no longer ours and we made that evaluation obviously between the last release and this release. Should negotiations dictate a change then we’d have to go about putting them on in a different way but for now these lots are as far as we’re concerned gone.

Your next question comes from the line of Lynn Savage – KBW Management Lynn Savage – KBW Management : I was just hoping you can reconcile the guidance for 2009 as an average delivery price of 600 to 625. In the fourth quarter the net [sign] was 495 so can you just talk me through how we get back to the higher average price.

You have to look at gross signed, not net. Lynn Savage – KBW Management : Can you give me an apples to apples comparison.

Gross signed was 582, so you’ve got a backlog of about 647 and you have gross signed at 582, when you blend them all together we think we’ll be in the 600 to 625 range and the reason we gave you the guidance which says its going to side higher is because that’s going to come more from the backlog and the stuff at the end of the year will come more from the closings that we signed in fourth quarter. Lynn Savage – KBW Management : And your average cancelled price this quarter was a lot higher at 785, so is there an assumption in that 600 to 625 number that we stop seeing that dynamic where the average price has a higher cancellation?

Its assuming that cancellations will be historically spread among the company in normal proportions and—

I would tend to answer, the answer is yes to a certain extent, yes. Lynn Savage – KBW Management : Why are we seeing that higher price—

You have fluctuation from quarter to quarter. Some quarters its been very close to the same number and some quarters its been higher. As the average product point that we offer goes down and the backlog is higher you would expect that some cancellations coming from the backlog, that average cancellation has a higher price then the average— Lynn Savage – KBW Management : So you’re saying this quarter is just sort of random fluctuation or is there something else going on, [inaudible] or dynamic that we’re—

Not random but there are communities that are higher priced that had lost agreements. Lynn Savage – KBW Management : I’m just trying to understand, the higher price can’t get the mortgage you think, or is it just sort of, I’m just trying to figure out why—

No for the most part its not the mortgage its that they’ve decided that the market has gone south and that they don’t want to go with it. Lynn Savage – KBW Management : But more so then the lower price, do you know what I’m asking—

Its not, its older deals that had, chance is the market changed in the deal that other people who have had that problem.

Your next question comes from the line of [Daniel Greenberger – Gem Realty] [Daniel Greenberger – Gem Realty] : Can you speak a bit to the different trends you’ve seen at your various product types and different price points. I know that your cancellation rate was much higher during the last quarter with regard to your higher end luxury units, but could you talk a bit more about the can rate at some of your lower end community types.

Other then it seems that the active [inaudible] cancelled last and—

I think we have very little cancellation of the active [inaudible] which happens to be the lower priced product as well traditionally. It was 10% for active [inaudible] on a net basis not at a backlog, out of contracts taken. So its very small. [Daniel Greenberger – Gem Realty] : I know that you expect DC to illustrate stabilization sort of relatively sooner then other regions have you seen any traction in this yet?

I do expect that to be the case and no I haven’t seen any backup to my thesis yet. Its logical but it hasn’t occurred.

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Thank you much. Everybody have a terrific holiday and a very healthy and a Happy New Year.