Toll Brothers Inc. (TOL) said Wednesday that fiscal third-quarter home orders climbed 3% from a year earlier, stunning analysts who had predicted double-digit declines and sending the stock soaring more than 10% in early trading.

In a sign that there's life stirring for higher-end housing, the Pennsylvania-based luxury builder said net signed contracts during the three months ended July 31 gained from year earlier, beating Pali Capital's estimate of a 37% plunge. In dollar terms however, net signed contracts fell to $447.7 million from $469.9 million a year earlier.

While orders are not done deals, the builder was encouraged as its fiscal third quarter was stronger than the second quarter for only the fourth time in 23 years.

"Although our industry continues to face significant challenges, we are encouraged by the increase in the number of net contracts signed this quarter," Chairman and Chief Executive Robert Toll said in a statement. "Although some of our markets are still stuck in the mud, many are improving. While we have to work very hard for our sales, it does feel as if the fence sitters are looking for reasons to jump in on the side of buying. Price is no longer the overwhelmingly dominant factor."

The order price of $535,000 declined 8% year-over-year, beating Wachovia's $509,000 estimate. Unlike its peers, Toll has so far avoided dramatic price declines, but this shows some cuts are necessary. The results indicated fewer buyers are walking away. The cancellation rate came in at 8.5%, the lowest number reported in the sector since at least 2006, according to JP Morgan. For the first quarter, the sector's average was about 25%.

Home builders have been slammed the past few years, and lower consumer confidence for big-ticket items and rising unemployment has further hurt the industry and led to a surge in loan delinquencies and defaults. Still, Toll Brothers, known for its strong land-picking ability, has held up better than many of its peers.

Not all of the news, released before the market opened, was news to brag about: Building revenue fell 42% from a year earlier as the housing market continued to sag. Revenue for the three months ended July 31 fell to $461.3 million from $796.7 million a year earlier.

The company's backlog at the end of the third quarter was about 1,626 units, down 37% from a year earlier. In dollar terms, it fell 47% to $930.7 million.

The builder ended the third quarter with about $1.65 billion in cash, compared with $1.96 billion at the end of the second quarter.

The company also said it estimates pretax write-downs related to operating communities, land and land options and joint ventures in the third quarter to be between $90 million and $160 million. Included in the impairments are "significant" write-downs on certain land parcels targeted for disposition, it said.

Toll Brothers said it expects to record a deferred tax asset valuation allowance against a substantial majority of its deferred tax asset in the third quarter of its fiscal 2009.

Chief Financial Officer Joel Rassman said the company retired $295 million of public debt in the third quarter and it currently has no public debt maturing through its fiscal year 2011. It expects to have under $50 million maturing in its fiscal 2012.

The company plans to detail its full third-quarter results on Aug. 27.

Toll was recently up 11.1% at $22.76, making it by far the sector's biggest gainer. Beazer Homes USA Inc. (BZH) added 7.7%, Lennar Corp. (LEN) is up 4.7%. The Dow Jones US Home Construction Index is 4.55% higher.

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

(Kerry Grace Benn contributed to this report)