Luxury home builder Toll Brothers Inc said on Wednesday it expects to report a 42 percent drop in third-quarter homebuilding revenue, but said net signed contracts increased in the quarter.

Preliminary results for the quarter ended July 31 showed homebuilding revenue of $461.3 million and an order backlog of $930.7 million.

Horsham, Pennsylvania-based Toll said in a statement net signed contracts rose 3 percent to 837 units. The company said this was the first time in 16 quarters that net signed contracts exceeded the year-ago figures.

While the statistics above cannot be considered determinative of the luxury segment's recovery, or that of the overall home building industry, we believe they are more indicative than anecdotal, Toll Chief Executive Robert Toll said in a statement.

However, in dollar terms, net signed contracts declined 5 percent to $447.7 million.

Toll's cancellation rate was 8.5 percent in the quarter, down from 19.4 percent a year ago.

The company plans to release full third-quarter results on August 27th.

(Reporting by Ajay Kamalakaran in Bangalore with additional reporting by Nick Zieminski in New York; Editing by Unnikrishnan Nair)