* Q2 EPS of 72 cents vs estimate of 76 cents
* Raises 2018 forecast for home deliveries
* Costs up 20.5 pct, adj. gross margins slip
* (Adds full-year forecast, details on earnings)
May 22 (Reuters) - U.S. luxury homebuilder Toll Brothers Inc's second-quarter profit missed Wall Street estimates on Tuesday, hurt by higher costs due to rising prices for building materials and shortages of land and skilled workers.
Costs rose 20.5 percent to $1.29 billion in the quarter and adjusted gross margins slipped to 22.5 percent from 24.3 percent a year earlier. That number narrowly missed the homebuilder's forecast of 22.8 percent for the quarter.
"Home ownership and household formation rates are increasing, while supply remains constrained," Executive Chairman Robert Toll said in a statement.
The U.S. housing market is yet to fully recover from the long-term damage of the subprime crash a decade ago. Many homebuilders are also fighting rising costs and labor shortages even though demand is picking up.
Orders, an indication of future revenue for homebuilders, rose 6.2 percent to 2,666 homes.
The Pennsylvania-based company said the average price of homes rose to $847,900 from $832,400 a year earlier, while the number of homes sold rose to 1,886 from 1,638 in the quarter.
The company raised its forecast for the number of homes it expects to sell in fiscal 2018 to between 8,000 and 8,500 units, from between 7,800 and 8,600 units.
Toll Brothers also raised the lower end of its full-year average price forecast to $830,000 from $820,000 but kept the higher end unchanged at $860,000.
Homebuilders PulteGroup Inc and Lennar Corp have also raised their annual home sales forecast, indicating homebuyers' optimism around an improving economy despite rising home loan rates.
Net income fell to $111.8 million, or 72 cents per share, in the quarter ended April 30, from $124.6 million, or 73 cents per share, a year earlier, with the company recording an inventory charge of $13.8 million.
Revenue rose to $1.59 billion from $1.36 billion a year ago.
Analysts on average had expected a profit of 76 cents per share and revenue of $1.58 billion.
(Reporting by Sanjana Shivdas in Bengaluru; Editing by Arun Koyyur)