Robert I. Toll - Chairman of the Board, Chief Executive Officer Joel H. Rassman - Chief Financial Officer, Executive Vice President, Treasurer, Director Don Salmon - President of TBI Mortgage Co.

Dan Oppenheim - Credit Suisse Kenneth Zener - Macquarie Capital Michael Rehaut - J.P. Morgan David Goldberg - UBS Megan McGrath - Lehman Brothers Rob Hansen - Deutsche Bank Stephen Kim - Alpine Dennis MacSkill - Zelman & Associates Josh Levan - Citigroup Timothy Jones - Wasserman & Associates Buck Horn - Raymond James Stephen East - Pali Capital James McCanless - FTN Midwest Alex Barron - Agency Trading Group Shamo Sadukan - Lotus Partners

Good afternoon. My name is Brandi and I will be your conference operator today. At this time, I would like to welcome everyone to the Toll Brothers third quarter outlook conference call. (Operator Instructions) I would now like to turn the call over to Robert I. Toll, Chairman and CEO. Please go ahead, sir. Robert I. Toll: Thank you, Brandi. Welcome, everybody. 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; Kira McCarron, Chief Marketing Officer; Don Salmon, President of TBI, our mortgage company; 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. Today we reported preliminary revenue, backlog, and contract results for our third quarter ending July 31/08. We will announce final results when we announce earnings on September 4th. Third quarter building revenues were approximately $796.5 million. Backlog was approximately $1.75 billion, and net signed contracts were about $469.7 million. These totals represent declines of 34%, 52%, and 35% respectively in dollars, and 31%, 48%, and 27% respectively in units, compared to fiscal year ‘07’s third quarter. Nine-month home building revenues were approximately $2.46 billion and net signed contracts were approximately $1.34 billion. These results represent declines of 29% and 49% respectively in dollars, and 27% and 37% respectively in units versus fiscal year ’07’s nine-month results. Our third quarter results reflect the continued weakness in most of our markets. However, we believe there is growing pent-up demand from those who have postponed buying during the past almost three years. When we run promotions and work the phones for an area, our rate of deposits improves significantly. We believe the consumer’s confidence, or lack thereof, in the housing market is the key to its recovery. Although the rate of cancellations as a percentage of our backlog remain quite elevated compared to our historical standards, total cancellations during the third quarter of 195 were the lowest quarterly total in over two years. We believe this reduction in cancellations is a positive indication for our industry as perhaps more buyers in our backlogs are willing and able to get to the finish line. With the passage of the 2008 Housing and Economic Recovery Act, Congress and the White House have offered a life line to many homeowners facing foreclosures, which could help keep more people in their homes and fewer distressed properties from coming to the market. And they have provided an incentive to new customers to move off the fence and become first-time buyers in a market that very much is in their favor. This may help to restore confidence in the market. I’ve been asked by many both inside and outside of our firm who are interested in the value of real estate to go easy with the rating of the markets, or as it is known in here, as the F report. It is believed that I am not helping to restore confidence in the market by rating markets as F-minus, F, or F-plus. For my review of the markets, therefore, I shall be more circumspect than in the past. Please refer to the last report for decoding this review. Starting with the Northwest, Massachusetts remains unchanged, while Connecticut is currently the best market we have in the country. The New York suburbs are about the same as they were last time. Most recently, we’ve had a little more interest in the New York City urban markets of Brooklyn, Jersey City, and Hoboken than in the past few months. The Jersey suburbs are a hair better than in the last report. In the Midwest, unfortunately it’s about the same for the Detroit, Chicago, and Minneapolis markets. In the mid-Atlantic region, things are also pretty much unchanged in Northern Virginia and Maryland. In the South, Raleigh has slipped a little, so has Charlotte. Unfortunately, South Carolina, Georgia, most of Florida, are pretty much the same as they were in our last report, except Naples, which is doing better than the rest of Florida. Texas also is about the same as the last report, except that we had a little softening in the Dallas market. In the West, unfortunately, California, Arizona, and Nevada are all pretty much as they were. Denver is doing a little better. Given current conditions, we continue to take write-downs. While we have not yet finalized our impairment analysis, we estimate that pretax write-downs related to operating communities, land and land options and joint ventures in fiscal year ’08’s third quarter will be between $100 million and $200 million. Given the current state of the market, we are not comfortable giving earnings guidance. We have continued to trim our land positions, which now stand at approximately 48,500 lots, 68% of which we own. Our high was about 91,200 lots at fiscal year ‘06’s second quarter end. Our community count, which peaked at 325 in fiscal year ‘07’s second quarter is currently at 290 and is now expected to be at approximately 275 by fiscal year-end ’08. At third quarter end, our cash position of approximately $1.5 billion, combined with approximately $1.3 billion of availability under our bank credit facility, which extends to March 2011, provides us with nearly $2.8 billion of liquidity. We believe our current inventory and liquidity give us a solid foundation to operate and succeed in the current difficult climate. We also believe our capital base and our operating teams should provide us with the capabilities to succeed when the market rebounds. Brandi, we’ll now turn it over to you for questions, please.

(Operator Instructions) Your first question comes from the line of Dan Oppenheim with Credit Suisse. Dan Oppenheim - Credit Suisse: I was wondering, as you look at some of the opportunities out there with some of the privately held builders who are challenged financially, just given your balance sheet, what is your appetite for that, given that sort of that it’s likely to be a bit of time before we see more recovery? How much do you want to use that versus saving the balance sheet for when you are more confident in recovery? Robert I. Toll: We will not hesitate to buy assets if we think they are a steal. We’re not looking to buy the builders. I don’t think we’d be able to because most of their assets probably are under water and nobody is going to shoot themselves, so they are not going to give us a price that puts them under water. But we are more than happy to talk to those who are financing the unfortunates. Dan Oppenheim - Credit Suisse: And then wondering -- you talked about a little bit better trends in Naples. Given what’s happened to pricing in that market and where pricing often helps to [stimulate volume], have you done anything different there in terms of that Naples market being healthier in terms of what you can do in terms of pricing and incentives or marketing there, or is it do you think the overall market [inaudible]? Robert I. Toll: We think it’s the overall market. We have not done anything different there than we’ve done in the rest of the country. We were pleasantly surprised as, I’ve said in the past, Naples was perhaps the worst market that we had for some time and we were very happy to see it come back. It remains an anomaly though because the rest of Florida hasn’t followed, as many other markets have not followed as well. Dan Oppenheim - Credit Suisse: Okay. Thanks much.

Your next question comes from the line of Kenneth Zener with Macquarie Capital. Kenneth Zener - Macquarie Capital: Can you address the number of units that you guys have under construction? A lot of the builders have given that. Your backlog conversion hit I think almost 50% this quarter, well above your guy’s average. Joel H. Rassman: We don’t start a house generally until we have it under contract and our backlog has probably got various degrees, other than the stuff that was just signed in the last 30 days, almost everything else in our backlog is at various degrees of construction. Robert I. Toll: I didn’t understand that to be the question. I thought he wanted to know how many homes we had in backlog. No? Joel H. Rassman: And I think that what you are seeing is the higher conversion rate is accomplished through a couple of different things, and there’s a little bit of an anomaly. One is that as you have less backlog on a per community basis, it’s easier to get the subs to work on the houses that you have and therefore you get to get that backlog turned -- Kenneth Zener - Macquarie Capital: Okay, so what had been kind of a nine, ten-month construction cycle is coming down because the -- Robert I. Toll: Because we -- (Multiple Speakers) Joel H. Rassman: And actually, we were averaging over 12 months in many communities two years ago. Kenneth Zener - Macquarie Capital: Right, so is it kind of a function of the house being reduced in size from -- Robert I. Toll: No, it’s the number of homes in backlog, that’s all. Kenneth Zener - Macquarie Capital: All right, and then -- Joel H. Rassman: And then there was a little bit of an anomaly that will happen quarter to quarter caused by the high density product which will have a significant number of closings when the buildings get complete, so that -- Kenneth Zener - Macquarie Capital: Right. Okay. Joel H. Rassman: But that didn’t affect this quarter. Kenneth Zener - Macquarie Capital: All right, but that sounds like structurally, you’ll be able to have that higher conversion rate even -- okay, and then can you talk about the rate that you and your lenders are able to get from the borrowers relative to the past actions that you’ve done? Because the spread is currently about 100 bps for jumbo in the conventional market. Can you talk about where you guys are today versus your specialized lenders and their willingness to keep lending? Thank you. Robert I. Toll: Sure. Don Salmon.

Let me address the spreads first -- the spread between conforming -- Robert I. Toll: Excuse me, can you hear Don well enough? Kenneth Zener - Macquarie Capital: Yes. Robert I. Toll: Go ahead.

The spread between conforming and what we call jumbo conforming, that temporary which is now 725 and will be reduced at today’s pricing is an eighth of a point. The spread between conforming and true jumbo at today’s pricing is three-quarters of a point, so we are a little bit inside of what I think the average in the market place is, of a point. Kenneth Zener - Macquarie Capital: And that spread or the lack of the spread is something -- do you guys -- is that your lenders absorbing that or is that something actually that you guys are trying to -- Robert I. Toll: No, that’s all -- when you say absorbing, they are not absorbing. It’s what the market is. What Don said was you have conforming jumbos that were 7.25 and we’ll be going -- actually I thought it was 7.29, and that 7.29 will be reduced after the end of the year; the jumbo limit drops to 6.25 -- Congress in its wisdom took the 7.29 that they had given earlier in the year back down to 6.25, so those jumbos only have an eighth spread over the old conforming, which was 4.17, and we’re not subsidizing any of this.

And the truth is, what’s happened, we just had a conversation with another major bank this week -- the banks are seeing the value of our homebuyers and they understand that our people, our delinquencies are very low and our people are relatively affluent and it’s customers that the banks want, so they are a little bit more aggressive with us I believe than they are with the rest of the market. Kenneth Zener - Macquarie Capital: Thank you.

: Michael Rehaut - J.P. Morgan: First question, I was wondering if you could possibly give us a little bit of -- and by the way, we still appreciate the grading system, even though you were referring to last quarter, it’s helpful still I think from our perspective, but regarding the order trends during the -- I was wondering if you could give us a little insight into the trend during the quarter, if the -- you know, overall you are talking about a negative -- what is it for this quarter -- the drop-off rate was about 27%. I was wondering if you could give us a sense of, from beginning of the quarter to the end of the quarter -- Robert I. Toll: Yeah, I can do that. In general -- Michael Rehaut - J.P. Morgan: And traffic as well, and I’m sorry, also how promotions impacted those trends throughout the quarter. Robert I. Toll: Okay. The trend during the quarter is we got a little bit better but we’re talking on a microscopic basis, using percentages. We went from like a 95 to 100, to give you an idea of how we got a little bit better during the quarter. With respect to traffic, it’s still dismal. Traffic is -- it’s consistent, however. It has not gotten any worse for the last three quarters, so we feel as though we’ve stabilized but I don’t want to give you the indication that that makes us feel good. It’s as though we walked into the tar pits, sunk up to our nose, our feet are touching a ledge and we are not going down any further but that sure doesn’t make us feel that comfortable. With respect to promotions impacting the trend in the quarter, I would say not as we’ve been running promotions for the last three quarters. I feel like as I watched the Olympics last night and heard some of the ads by the car manufacturers that we may be finally cycling into their kind of marketing. You know, this week get this Toyota, this Chevy for $199 a month, good until September 2nd. And then September 3rd, there will be another special. The only difference is our specials aren’t just by advertising, by putting the word out. Ours are accompanied by phone-athons where we have all of our sales people, together with our project managers, our vice presidents, our senior vice presidents, working the phones, calling people because now you have an excuse. You have this two-week period or one-week period only, a sub-zero refrigerator, and it gives us a reason to call and spook up the traffic. But we are heartened that at least we are able to spook up the traffic. That indicates that there are buyers out there waiting to be nudged. It will take a general turn in confidence for the big nudge to occur but sooner or later, it will occur. Michael Rehaut - J.P. Morgan: I appreciate that color. When you are doing the promotions, are you kind of just advertising pre-existing discounts and incentives or do you find yourself having to throw in another couple of percent, either through a discount or off the top? Robert I. Toll: Well, primarily it’s just taking the incentives that exist and changing them. If you had a $30,000 incentive ordinarily packaged on the home, drop the 30 to 25 and put 5 in specific incentives that you are now calling about, you’ve decided to spend the money, as it were, for the client to be in a particular area. But we also get for the promotions additional help from our material suppliers and sub-contractors. We’ll go to the subs and say all right, we’re going to throw in a garden room off the kitchen this week. We want you to put your labor in for nothing. We’ll go to the greenhouse window supplier and ask him to supply us at cost for the week and the subs and material men have been very cooperative. They throw everything in that they can and so you’ve got a little more coming at the customer’s way sometimes, and that helps to get people off the fence. People are looking for a reason to get off the fence. The most asked question in America today other than who Obama’s Vice President is going to be is probably when is the bottom? And if you even smell as though you are in real estate, people ask you that question all day long. Michael Rehaut - J.P. Morgan: Right, right. Last question, Bob; in your commentary on the press release and in your opening remarks, you pointed to the 195 cancellations as being a positive, and I guess I just wasn’t clear on that, given that I would think a part of that driver would just simply be because you have some of the -- while you have that 195 is the lowest in the last eight quarters, so too is your incoming gross orders and -- Robert I. Toll: No, I had the same question when I read the proposal to read this from Fred Cooper and I asked Fred, I said hey, go check this number. I don’t want to be caught in exactly what you are talking about, and the answer was no, this is a good stat. There was in fact one quarter I think out of the past eight where we were not as good -- where we were better than this quarter as a percentage of backlog, so this is a real stat. Michael Rehaut - J.P. Morgan: Okay.

Your next question comes from the line of David Goldberg with UBS. David Goldberg - UBS: Good afternoon. The first question is about how the competitive landscape looks for you and kind of how you think your order declines are trending relative to maybe some of the smaller private builders, if you think maybe you are gaining share in the market or losing share in the market. Robert I. Toll: I don’t think we’re losing share in the market. What was the other part? David Goldberg - UBS: Whether you are gaining share -- what the competitive landscape looks like, if you are seeing some attrition from some of the smaller private custom guys that you might be competing against. Robert I. Toll: We see the same competitive situation in general as we have seen in the past two-and-three-quarters years, referring back to when we think the market decline started, which was probably Katrina ‘05. And the reason is that as these smaller builders are failing or as our larger builders are looking for cash flow more seriously, we run into even more competition perhaps than we had before, so until a guy has gone out of business, he continues to offer more and more competition. We also have the addition now of the foreclosure issue. If you are on a street -- if you are selling on a street where there is a foreclosure or in a neighborhood where there are several foreclosures, you’ve got serious competitive problems because people say that house is 350, what makes this house 700? Well, it’s tough to give an answer, that this one isn’t coming out of foreclosure -- who cares? So I wouldn’t say the competitive situation has eased up. David Goldberg - UBS: Do you expect that’s going to change as you see -- Robert I. Toll: Yes, it’s definitely going to change. It’s changing as we speak. Every week we are seeing more and more offerings from banks, from hedge funds and the other side of that coin is a bank or a hedge fund is offering it as opposed to a builder, somebody has gone out of the business. So it’s getting better in terms of the offerings but we still feel the competitiveness from those going under, or trying to maintain or create some cash flow. David Goldberg - UBS: And I guess the follow-up question would be about the hard costs and how much you think hard costs kind of per home have come down? And obviously some of it is attributable to re-specing the house, redesigning the house a little bit but also just directly from your suppliers -- give us an idea where you think hard costs are, as much same-store as you can. Robert I. Toll: I could but Joel said he wants to. Go ahead, Joel. Joel H. Rassman: For the quarter, we had a very small increase in total labor and material costs on a house basis, a couple of hundred dollars on average it looks like a house. Robert I. Toll: I thought it was more than that. Joel H. Rassman: No, for the quarter, that’s what it was. Robert I. Toll: Okay. The reason being that as the prices drop, if you are building for the same amount, your costs have gone up, relatively speaking. Joel H. Rassman: It was absolute dollars, it was a couple hundred dollars. Robert I. Toll: Oh, okay. David Goldberg - UBS: Thank you very much. Robert I. Toll: You’re welcome. Brandi, I’ve got a question from the Internet -- Rick Murray asked how many active communities you have in the Naples market and you guys think it’s five. I though we had a few more than five. Is that it, five? Florida West, one, two, three, four, five, six. Only a few lots left -- that’s all right. They’re fairly valuable to me. To me, they are children. Six is the answer. Thank you. Brandi.

Your next question comes from the line of Megan McGrath with Lehman Brothers. Megan McGrath - Lehman Brothers: Good afternoon. My first question, your community count was reduced a little bit faster than you had initially indicated. You’ve reached your year-end target number already, so I’m just kind of curious if you can comment on that. Was that a result of closing out a little bit quicker or are you not opening as many communities this year as you had originally forecasted? Robert I. Toll: Probably the latter, though I just went over that Monday night. We have a couple of communities opening in September. We have a big one opening in September in New York City. We’re back into Manhattan. Joel H. Rassman: We have opened less communities than we originally anticipated. Megan McGrath - Lehman Brothers: And any particular areas that you’ve sort of decided not to open this year and have moved into maybe ’09? Robert I. Toll: Not that I can recall. Anybody have that? Joel H. Rassman: No, but the biggest decline in the number of communities, the state with the biggest decline is Florida. We’re down 12 communities in Florida year over year to date. Robert I. Toll: Glad to hear that. Megan McGrath - Lehman Brothers: Thanks, and then just a really quick follow-up, Bob, to your -- I’m sorry? Robert I. Toll: I’ve got it in my head -- it’s primarily Orlando. Megan McGrath - Lehman Brothers: Okay. When you were talking, answering the question around foreclosures, you talked about seeing more offerings out of hedge funds and banks. I’m assuming you are talking about land but it seemed like they are still not good enough, I would take it, in terms of pricing? Robert I. Toll: We’re getting there. We sold one today that have got a bunch of people running around excited, so that’s the first one we sold that got us excited. Megan McGrath - Lehman Brothers: Okay, great. Thank you.

Your next question comes from the line of Nishu Sood with Deutsche Bank. Rob Hansen - Deutsche Bank: This is actually Rob Hansen on for Nishu. My first question was just on the can rate -- last quarter you had mentioned the kind of different priced products and the different cancellation rates and a higher cancellation rate on the higher priced product. Anything like that this quarter? Robert I. Toll: Joel, do you have that? Joel H. Rassman: As you could see in the difference between net and gross product pricing point, the cancellations came closer to what our average offering is because it’s their -- time has passed and we’ve priced out, some of the more expensive communities have sold out, so I don’t really have a break on it. We didn’t have some of the communities where we had to give back deposits this quarter because we couldn’t make the timeframe of deliveries, so that was more higher priced and higher priced product than the past, so -- Robert I. Toll: And we overestimated people wanting cancellations, where they had them. Joel H. Rassman: We did a little bit better. Some people came back. Robert I. Toll: Yeah. Rob Hansen - Deutsche Bank: Okay, and then just a follow-up on the -- kind of a housekeeping question here but in the revenues from percentage of completion, I just noticed it was down a lot, significantly than past quarters. I just wanted to see, you know -- Joel H. Rassman: It’s going to disappear, virtually nothing left. We are no longer on any buildings, reporting any new buildings on a percentage completion basis. Everything is completed contract and all you are seeing is the burning off of the backlog, so we’d expect that disappear and hopefully if we could figure out how to get rid of the disclosure next year, we’ll take it out because it’s misleading and immaterial. Rob Hansen - Deutsche Bank: Thank you.

Your next question comes from the line of Stephen Kim with Alpine. Stephen Kim - Alpine: I had a question regarding your experience with customers right now. In particular, I was wondering if you could give us a feel, maybe a rough percentage or ballpark, what percentage of your customers that are walking in the door who are interested in buying a house are actually getting turned down and are unable to buy the house because of affordability or approval reasons? Robert I. Toll: I don’t know. Do you guys? Joel H. Rassman: We pre-qualify, so hopefully we don’t get to that position. Robert I. Toll: Yeah, but that’s not the question. I don’t have an answer, Steve, how many come in and look, want to buy but can’t afford it, either because of some finance problem or because they just don’t make enough -- by finance, I mean credit rating problem. I don’t have that answer. We have a surprising -- anecdotally, I know we have a surprising number of people who are not coming from old or from used homes in the New York suburban market. That could be in other markets too but I just know that because I discussed that with our regional president who handles the New York suburban market. It was something like almost 50%. And some of those homes are $700,000 that we are selling in the New York suburban market. Stephen Kim - Alpine: So first-time buyers, is what you are saying? Robert I. Toll: No, not necessarily first-time buyers but they are not coming out of an old home now. They may have sold their old home, moved into an apartment and now want to go back into a home, or they could be first-time buyers, don’t know. Stephen Kim - Alpine: Right, okay, thanks. My second question relates to sort of following up on Dave’s question about your market share -- you’ve talked about the fact that your sub count is going to be down, I think you said to 275 or something by the end of the year. That’s about down 13% year-on-year, or something in that order. I guess I’m curious as to what you think is going to happen to your share when we start entering the up-turn, whenever that might be? Is your ability to ramp up communities to be higher than you might otherwise have expected? Does it take a quarter or two for you to do that or can you do it relatively quickly? Robert I. Toll: It takes a quarter or two in reality; a quarter or three in reality to re-open a community that you’ve closed but still possess. The reason I said in reality is it only takes a couple of weeks and if you want to it cutely, it only takes a couple of days, which we’ve done, especially in the hot markets, in those great markets of yesteryear -- you know, you pull a Winnebago onto a track, put out the awning and turn the inside into the selection center and start to sell homes off of plot plans. You can open/close communities by pulling up a trailer but the reality of an opening is when you have a model and you have -- we already have the brochures and inserts only take a couple of days to print but to really open, you want to open with a model complex and that can take you anywhere from one quarter to three quarters. Stephen Kim - Alpine: Okay, that’s great. And then my last question relates to a comment which I think you made -- I’m going to say maybe a couple of months ago, I think, in an interview. I think you were addressing the stimulus package and the first time buyer 7500 tax credit. And I think your comments at the time, if I remember them correctly were something along the lines that you didn’t anticipate that it would be terribly meaningful because what you really needed to do is not just target the first-time buyer but rather target all up and down the food chain. But in today’s commentary, it seemed like you were somewhat more hopeful. I was wondering if you could give us a sense for what drove the evolution in your thinking. Robert I. Toll: I don’t think there was an evolution in my thinking. You have to refer to the grammar in the paragraph that I read, and let me see -- and they have provided an incentive to new customers to move off the fence and become first-time buyers in a market that is very much in their favor. My quote was this may help to restore confidence in the market. Then again, it may not. Let’s hope that it does. It’s not a bad thing, for certain. It’s got to be helpful to some degree -- why debate the degree? It is what it is. It’s done. The lobbying effort of Congress is through for the time being, I hope for a long time being because I hope the market does return but if not and another stimulus package is needed, then you will hear from me again. But for the time being, I’m thankful for what I’ve got. Politics is the art of compromise. Stephen Kim - Alpine: Great. Thanks a lot.

Your next question comes from the line of Dennis [MacSkill] with Zelman & Associates. Dennis MacSkill - Zelman & Associates: I was just hoping -- probably, Joel, this is best given to you; do you have the update on just land development and acquisition spend so far this year, and then what that would compare to last year, year-to-date? Joel H. Rassman: We’re in the process of closing the quarter so I can’t really answer that question. The 10-Q will have that. That’s going to be included and that will be out the week after the next release. Dennis MacSkill - Zelman & Associates: The Q will disclose what you’ve spent on total -- Joel H. Rassman: -- you can figure it all out. Dennis MacSkill - Zelman & Associates: Along the same lines, what would you estimate would be your carry costs on an annualized basis right now for the land that you hold, between taxes and HOA dues and everything else that you would throw into that bucket. Joel H. Rassman: I don’t have that answer. We have -- Robert I. Toll: It’s a good question in these times. Joel H. Rassman: -- I mean, our interest costs are primarily supporting our construction in progress, not our land. It would primarily be real estate, taxes, and -- it would primarily be real estate, taxes, and HOA dues. Robert I. Toll: Not a lot in HOA dues, I would think. Joel H. Rassman: No. So it depends on how you allocate your costs but since our debt is about $1.8 billion in total and our construction in progress on just bricks and sticks is significantly more than that, we have nothing allocated to land. Dennis MacSkill - Zelman & Associates: Well, let’s just exclude the interest and just think about it from a cash standpoint on the taxes and HOA, as a percentage of -- (Multiple Speakers) -- a ballpark to think about? Joel H. Rassman: I don’t have the answer. We’ll try to get it for the next conference call but I don’t know. It can’t be a big number for real estate taxes and HOA dues. Dennis MacSkill - Zelman & Associates: Okay. All right, thanks, guys. Robert I. Toll: You’re welcome, sorry. Brandi, I have questions from Phillips Briggs, or maybe that’s Briggs Phillips; let me see, if you sell a home for break-even, what percentage of the home selling price will an improved home site represent? Well, traditionally a home site was 25% of the sale price of a home. Joel? Joel H. Rassman: For us, we’ve historically averaged about 20% of the sales price, which -- you’re looking, Bob, at what you see contribution to G&A and they are asking GAAP, so -- an improved lot is roughly 20% of the sale price of the house. That’s been a traditional number, or an historical number for us. It’s pretty much stood the test of time. Robert I. Toll: How many improved home sites do you currently own? 15 -- Joel H. Rassman: Fifteen-five. Robert I. Toll: Thank you, Joel -- 15,500. What’s your average cost for all the improved home sites you own? Joel H. Rassman: Using the 20% number -- Robert I. Toll: This is a test for, what is this, an accountant test? Go ahead. Joel H. Rassman: Using the 20% number, since it’s about $600,000 a house we’re selling now, you would say that’s about $120,000. Robert I. Toll: And what is Toll’s definition of an improved home site? I would hope about the same as everybody else’s definition. You’ve got black top and curbs and water and sewer, gas and electric and whatever else, telephone lines and you are ready to build a home and deliver same. So thank you, Briggs Phillips. Brandi.

Your next question comes from the line of Josh [Levan] with Citigroup. Josh Levan - Citigroup: Do you have a sense of how the labor markets are holding up in your key markets? Robert I. Toll: Yeah, I do. More and more are turning away from the business, or having the business unfortunately turn them away and therefore the labor pools are shrinking. And when the market turns, it will be difficult to find subs to keep up with production, I predict, and you will see shortfalls in supply because of that. Josh Levan - Citigroup: Okay. I was actually referring to the employment markets, not the subs market. Robert I. Toll: I’m sorry, what -- Josh Levan - Citigroup: I mean employment -- how are employment trends holding up in your key regions in terms of people having jobs? Robert I. Toll: The regions in the United States, basically. We’re in 22 markets, so you know as well as I -- Philadelphia, Boston, New York, San Francisco, Los Angeles -- I can’t provide any answers that you don’t already have. Josh Levan - Citigroup: Okay. The buyers in Naples that you are talking about, do you know, are they buying the homes as their primary residence or as secondary homes? Robert I. Toll: I believe it’s mostly secondary but there is a fair percentage that are making it their only home. I think what’s happening is the secondary home becomes -- they are buying a secondary home that is their primary home. In other words, they are older and retiring and moving down permanently. Josh Levan - Citigroup: Thank you very much.

Your next question comes from the line of Timothy Jones with Wasserman & Associates. Timothy Jones - Wasserman & Associates: I don’t like that old and Naples together. Robert I. Toll: What can I tell you? Timothy Jones - Wasserman & Associates: Anyway, a couple of questions; first of all, a couple of clarifications, please -- you said there’s a three quarter point difference between the conventional, the conforming and non-conforming jumbos. Is that correct? Robert I. Toll: Yeah, that was for those that were not within the Fannie Mae, Freddie Mac limits. Those are jumbos that exceed the 7.29 today. Timothy Jones - Wasserman & Associates: Why would -- do you really sell that many homes that would need something over 7.29? Why would anybody pay that much more? Robert I. Toll: I’m going to skip that question. Timothy Jones - Wasserman & Associates: Oh, come on, Bobby. Robert I. Toll: They want a bigger, better, more beautiful home which happens to be in a district where it costs more than $800,000 or $900,000. Timothy Jones - Wasserman & Associates: Okay. Don, can you give me the percentages of your conformed, of your cash down payments, your conforming jumbos, your non-conforming jumbos and the rest? Robert I. Toll: We can. Don.

Roughly 20% of our TBI mortgages production was true jumbo, 80% was saleable to Fannie Mae, including that jumbo, the conforming jumbo piece. Our average down payment, our average LTV for the quarter was about 67%. Timothy Jones - Wasserman & Associates: So you are saying -- when you say true jumbos, I mean, non-conforming jumbos or what? Robert I. Toll: Yes, he meant non-conforming jumbos.

Non-conforming jumbos. Timothy Jones - Wasserman & Associates: So 80% of your -- and the rest of it, how much was conforming jumbos and how much was cash or other?

Conforming jumbos, the definition of conforming jumbo is an A paper loan. It would be saleable to Fannie Mae for any reason other than loan amount. Timothy Jones - Wasserman & Associates: Right.

An A paper jumbo was about 20%, not saleable to Fannie Mae, meaning -- Timothy Jones - Wasserman & Associates: Yeah but how much were saleable to Fannie Mae?

Eighty percent. Timothy Jones - Wasserman & Associates: No, you had to have some cash, you had to have some no down-payment loans, didn’t you?

We had 80% of the business at TBI Mortgage -- Timothy Jones - Wasserman & Associates: Okay, I’m with you. Okay, thank you. Would you make a couple of things clear? You said that foreclosures are becoming less onerous now I believe, Bobby, and that’s the only -- you’re the only builder I have ever heard say that. Robert I. Toll: Well, what I suggested was the 2008 Housing and Economic Recovery Act has offered a lifeline to many homeowners facing foreclosure, which should help keep more people in their homes and fewer distressed properties from coming on the market. That’s what I said. I didn’t say that -- Timothy Jones - Wasserman & Associates: Not that it’s getting better? Robert I. Toll: I did not say that foreclosures are abating. Timothy Jones - Wasserman & Associates: And lastly, I was talking with one of our competitors, much lower priced, but they said, and I’m seeing this in other things, that half the homes in Southern California for sale right now are owned by the banks. Can you give me what the situation is in your price range and the talk about, you know, that this problem on foreclosures are moving up to the higher income brackets? Robert I. Toll: I’m sorry, I can’t give you any color on that. I don’t have the information. I think the logic is that it will move to the upper brackets but I don’t have any data to refer to. Timothy Jones - Wasserman & Associates: Okay. Thank you so much, Bobby.

Your next question comes from the line of Buck Horn with Raymond James. Buck Horn - Raymond James: Could you expand upon your thoughts on the state of the land market that you mentioned earlier, just what signs of increasing activity are out there, are prices stabilizing and has Toll been a buyer or a bidder on any land tracks that are on the open market right now? Robert I. Toll: They are not stabilizing, the land prices are dropping, and therefore just now -- I guess in the last month or so we are starting to see some deals that are good enough for us to stop and work on them to think about whether we should make an offer or not. So I would say the land market is finally opening up. And it makes sense -- it’s consistent with what we’ve seen in the past recessions, when you went into a recession in the latter part of ’87, especially in the Northeast, you didn’t see the land offerings come to you until ’91 or even ’92, which was strange because by ’92, things were starting to recover. But you still had a fair amount of shakeout from the problems that began in ’87 and were followed through in ’88 and ’89. So we’ve now had the fall of ’05, we’ve had all of ’06, all of ’07, and we are almost three-quarters of the way through ’08, so it is time for the land to be disgorged by the financial institutions and that’s beginning. Buck Horn - Raymond James: And one follow-up -- are you seeing your mortgage lender partners continuing to tighten underwriting standards, even recently for your buyers? Robert I. Toll: Yes. Buck Horn - Raymond James: And order of magnitude? Robert I. Toll: Don.

What we are seeing is some LTV buckets tightening up. We’re not seeing a lot of tightening in the debt-to-income ratio type measures but it’s really mostly in LTV, in loan-to-value type measures. In terms of documentation, that’s already taken place. Robert I. Toll: We also have the additional problem that people that want to rent their old home are now up against specific regulation as opposed to negotiation with a bank saying look, the old home is easily covered. It doesn’t -- it’s not that material. They can easily handle it. Now the regs say that you have to have 30% equity in the old home, that you need six months of rent receipts --

In order to count -- if you are going to count rent against the old home, that’s right. Robert I. Toll: Right, et cetera, et cetera, so that’s stiffened up.

That’s a Fannie Mae regulation, by the way. That has not been adopted by everybody in the industry yet. Robert I. Toll: But it probably will be. Our all-cash buyers are 12.9% of our deliveries year-to-date. It’s greatly been, however, by the active adult communities where it’s 44.9% in active adults. Brandi.

Your next question comes from the line of Stephen East with Pali Capital. Stephen East - Pali Capital: As you look at your quarter over quarter performance, it improved, and yet as you went through sort of your outlook of what was going on in your markets, it didn’t really seem to improve. What do you think was going on, either what you all were doing or what was changing in your markets that, relatively speaking, this quarter’s order rates were better than last quarter’s? Robert I. Toll: I think it’s just general movement in the market, that people have been out of the market for, as I said earlier, for two-and-three-quarter years. Life moves on. They have accumulated decent wealth. They want to move and that’s generally how these markets finally correct. It’s not some cataclysmic effect, other than in the ’74 or ’75 time when Congress passed a fairly significant bill for housing. Generally, these markets work themselves out and the pent-up demand just swells until it finally goes over the top of the dam. When it first goes over the top of the dam, you don’t get a lot of water -- you get a little water, and then a little more and a little more and a little more, and I think that’s what we are seeing. Stephen East - Pali Capital: Okay, fair enough. And you all talked about -- you are not opening as many communities and it’s primarily in Florida. Would you truly characterize it as mothballing or is this just a quarter or two delayed from what your original plans were? And if it is mothballing, would that have factored into why your forecasted impairment charges are at a lower run-rate than what we’ve seen the last three quarters or so? Robert I. Toll: We don’t see the significant difference, the significance in the difference between mothballing for a quarter or two or truly mothballing them -- in for a pound, in for a ton. You know, when you shut down a community and put it aside, you’ve shut down a community and put it aside. Joel, would you answer the second part? Joel H. Rassman: We look at deals the same way whether we are opened or not opened. If there’s an impairment needed, the fact that we haven’t opened it doesn’t delay the impairment. Probably the population of community, of land deals that we look at is significantly more than the open communities. We probably will look at 350 communities this quarter, and we only have 290 open, so -- Stephen East - Pali Capital: Okay. Thanks a lot, guys.

Your next question comes from the line of James McCanless with FTN Midwest. James McCanless - FTN Midwest: I wanted to take the issue that Tim was talking about a little bit further and assuming that you have the LTV that you were talking about, the 67% and also the communities that you have now and the $625,000 limit in the new bill starting in ’09, how many of your communities that you have open or you plan to open ’09 do you think are going to be eligible for conforming finance under those new rules? Is it 50%, 60% -- Robert I. Toll: I understand the question. I haven’t got the answer in my head. Anybody?

Average sale price of new communities. Robert I. Toll: Yeah, that’s what is being asked and the new communities -- Joel H. Rassman: They are not any more expensive than the old communities. Robert I. Toll: I know them when I look at them as we approve them and discuss pricing but until they hit the Sunday night sales reports, I don’t track them often enough to remember them, so I’m sorry I can’t give you the answer. Logic tells me they are about the same as what we’ve been doing on average. James McCanless - FTN Midwest: I guess then the follow-up to that is are you all looking at different footprints, are you trying to reduce the footprints in certain communities to make sure that you are staying under that conforming loan limit with the best guess for what your labor, your materials, et cetera are going to cost you next year? Robert I. Toll: No, we judge the pricing of our communities not by trying to stay under the Fannie Mae [frame] at conforming rate but rather what the market dictates is the best price to generate the most profit out of that particular piece of ground, and that’s not even the best profit on as fast a time can be generated but on an absolute basis for that track of ground. We try and max out profit. James McCanless - FTN Midwest: Okay, great. Thank you. Robert I. Toll: You’re welcome. I’m asked, Brandi, by Danny Greenberger -- do you anticipate any ramifications from the elimination of down-payment assistance on October the 1st? Not for us, but I would anticipate there will be ramifications for those guys that have been using that. We have not been using it. Does the company expect move up volumes to decline as a result of the DPA elimination? Yes and no. We would expect that the whole daisy chain of the market will be impacted to some extent by those who started the chain by buying homes with nothing down, in effect, because the down payment was given to them. You eliminate a certain amount of buyers at the beginning of the chain and the whole chain slows down, so it doesn’t immediately impact us because we don’t use it but it will impact the daisy chain of home sales to some extent.

Your next question comes from the line of Alex Barron with Agency Trading Group. Alex Barron - Agency Trading Group: Bob, I thought I heard you in a recent interview say that you were out visiting some communities in the Southwest. I was wondering if you could talk about what you saw there. Robert I. Toll: I saw some beautiful homes, well maintained. I was disappointed and hoped that I would find trash blowing across the front yards and sales people with their feet up but instead, I saw a pretty active and dedicated team and I saw a great product. I saw no customers, or very few, and was disheartened by a whole lot of what I saw in the Southwest. There were some communities that I saw that I could not believe were not moving in the Phoenix area. In Nevada, Vegas and Reno, things looked pretty bleak and I don’t expect them to turn around with the rest of the country. I think they will come later. Alex Barron - Agency Trading Group: Do you think it’s a price issue or what do you think is going on, or is it more like foreclosures? Robert I. Toll: You’ve hit a couple of the items -- price, foreclosures. Confidence is the biggest one -- after you, [garcon], after you. You know, who’s going first? It will take a while. It will correct. That I am certain of. I mean, I remember in ’87 and ’88, Boston was described as Dresden. We went up there, looked around, and saw that the town had not been fire-bombed, that the colleges were still operating, and that people were still filling up Fenway. And we went in there and we were happy at the time. I don’t think any of these markets are blowing away permanently. Some will return earlier than others. Alex Barron - Agency Trading Group: My other question was I was looking at your backlog. I guess it’s down roughly half from the year-ago levels. I’m kind of wondering, as you look into next fiscal year, what impact is it going to have on your SG&A? How much of your SG&A is fixed versus how much is variable and what can you do to address the percentage of SG&A as a percentage of revenues? Robert I. Toll: Watch it very closely is what we can do. Unfortunately, that becomes the prime job of management. As times grow tougher and more depressed, management must make certain that overheads stay in line. As you are pointing out by implication, they can’t stay totally in line and therefore have to rise to some extent. You need a sales person, whether you are selling seven homes or 70 homes, and so we are doing our best to manage our overhead to keep it in line with our expected production. Alex Barron - Agency Trading Group: Okay, and last I was just wondering if you could give us your thoughts on the housing legislation that did go through -- are you happy with it, disappointed or what are your general thoughts or feelings about it? Robert I. Toll: Well, I accept what was passed with a gracious thank you. I think we could have done a lot better but as I said earlier, politics is the art of compromise. There’s a lot of Congress men and women who wanted this, that, and the other and this is the compromise that came out. I think we would have done better to follow the example as I referred earlier to the ’75 legislation, but we didn’t and that’s for the wisdom of those who were there and let’s hope that they’ve done it as well as it should have been done. If not, we’ll be back. Alex Barron - Agency Trading Group: Great. Thank you very much.

(Operator Instructions) Robert I. Toll: Brandi, we’re not looking for business. If you don’t have any more questions, we’ll slip out the back.

Your next question comes from the line of [Shamo Sadukan] with Lotus Partners. Shamo Sadukan - Lotus Partners: Can you talk about whether you believe you are passed the peak in terms of impairments? They were down this quarter and -- Robert I. Toll: I wouldn’t dare to answer such a question. Let’s see if Joel would. Joel H. Rassman: I couldn’t after you said that -- even if I wanted to, I couldn’t. The answer is we continually look at impairments every quarter and take what we believe we need to take, and I don’t know whether it’s peaked or hasn’t peaked yet. Shamo Sadukan - Lotus Partners: Okay, and can you walk us through -- Robert I. Toll: What elucidation. I’m sorry, yes? Shamo Sadukan - Lotus Partners: Can you walk us through on the JVs debt guarantees that you might have to make good on? And also situations where you may be actually forced to contribute cash into JVs? Is there anything like that that we should be worried about? Joel H. Rassman: We disclosed it in the last Q. We did have a detailed note in the last Q. We’ll do another Q in a few weeks and give you more detail if it’s necessary. We think our exposure is limited to what’s in the Q and -- Robert I. Toll: Do you remember what was in the Q? Joel H. Rassman: I don’t off the top of my head. Joe, do you have it in front of you? Robert I. Toll: You don’t remember either? Joel H. Rassman: It was very detailed. It’s a page worth of disclosure of every kind of -- Robert I. Toll: I’m looking for a general -- I don’t think it’s that material. Joel H. Rassman: No, there were some big numbers in there but we don’t think we’re exposed. We have to disclose all of it. Robert I. Toll: I’m sorry that I can’t help you. Shamo Sadukan - Lotus Partners: If I remember right from the Q, there’s $1 billion or $2 billion of potential buy-downs that these JVs have to make, but most of that exposure is not -- the JVs actually may not make most of those cash payments and none of those cash payments are, or most of those cash payments are not re-cost at all? I mean, is that a fair summary of the situation? Joel H. Rassman: Most of the JV obligations re-cost to Toll and that which is re-cost is disclosed. Shamo Sadukan - Lotus Partners: Okay. All right. Thank you, appreciate it.

There are no further questions. Are there any closing remarks? Robert I. Toll: Yes, thank you very much, Brandi. Thank you, everyone. Have a good day. Goodbye.

This concludes today’s Toll Brothers third quarter outlook conference call. You may now disconnect.