Follow the housing insiders' money

At 5:07 a.m. Tuesday, toxic words crossed the wires: "softening demand."

The two words were nestled in Toll Brothers' fiscal fourth-quarter earnings release and referred to the high-end homebuilder's prognosis for 2006.

To be sure, the company cited an arduous regulatory process as the primary culprit. Best-case scenario for delivered homes in fiscal 2006 had been 10,600 units. Now, Toll sees itself delivering as few as 9,500 – still a respectable jump from the 8,769 in 2005.

Still, like a dog with a favored bone, the market seized only on "softening demand," dragging the stock down 14 percent. At $33.91, Toll closed 42 percent off its 52-week high of $58.67 on July 20.

Predictably, the entire group of homebuilder stocks sold off in unsolicited, unwilling sympathy. The Bloomberg homebuilders index was down 7 percent Tuesday and has slumped 23 percent since July.

With all this money disappearing, it's a good thing the people running the homebuilding companies got out when they did.

So far this year, insiders at Toll have sold $588 million worth of the company's stock – representing nearly 10 percent of the current market capitalization. Robert Toll, chief executive, has liquidated north of $110 million.

As a group, Thomson Research senior quantitative analyst Mark LoPresti said, industry insiders have sold $976 million in 2005