Toll Brothers Inc.'s (TOL) fiscal third-quarter loss widened sharply on tax charges and write-downs, but the luxury-home builder said it sees signs that buyers are tiptoeing back into the market.

For the quarter ended July 31, the company posted a loss of $472.3 million, or $2.93 a share, compared with a prior-year loss of $29.3 million, or 18 cents a share.

The latest results included federal and state deferred tax asset valuation allowances of $439.4 million, and pretax inventory and joint-venture-related write-downs totaling $115 million, while the previous year's results included $139.4 million in write-downs.

Excluding write-downs, Toll reported a pretax profit of $3.7 million for the quarter, compared with year-earlier pretax profit $84.6 million.

Shares of the builder, which have gained more than 25% in the last three months, fell more than 2% in early trading, nearly matching the Dow Jones US Home Construction Index's decline.

Earlier this month, the company said revenue decreased 42% to $461.3 million. It added net orders surprisingly rose 3.1%, although they fell 4.7% in dollar terms. The cancellation rate fell to 8.5% from 19% a year earlier,as fewer buyers abandoned deals.

Still, Toll Brothers said that while its third-quarter results reflect continuing challenging market conditions, "we do see signs for optimism." The company said declining cancellations and more solid demand indicate that the housing market is stabilizing.

"We are reducing incentives and raising prices in selected communities," said Chairman and Chief Executive Robert I. Toll. "We believe that customers are recognizing that now is the time to get into the market to take advantage of near-record affordability and what is still, for now, a buyer's market."

That's a big deal for the sector, because desperate builders had to discount heavily and offer profit-eroding incentives during the downturn. Toll's peers offered everything from free vacations to upgraded kitchens to tempt jittery buyers.

The company said that four weeks into its fiscal fourth quarter, its per-community deposits, the non-binding precursor to signed contracts, are running 26% ahead of the year-ago period.

Toll Brothers said it now expects to deliver between 2,580 and 2,830 homes in its current fiscal year, compared with its June view of 2,200 to 2,800 homes. It could deliver between 475 and 725 homes in the fourth quarter at an average delivered price of $550,000 and $575,000 apiece.

Credit Suisse analyst Dan Oppenheim said he "would not be surprised to see Toll increase its community count in 2010 to take advantage of the improved demand."

Toll Brothers previously forecast an average delivered price of $590,000 to $600,000 for the fiscal year. Its prices are the sector's highest.

-By Dawn Wotapka, Dow Jones Newswires; 212-416-2193; dawn.wotapka@dowjones.com

(Joan E. Solsman and Colin Kellaher contributed to this article.)