Concerns about the housing market are starting to emerge

by

DIY store HD reported profits and sales that beat Wall Street forecasts Tuesday. Lowe’s LOW also reported better-than-expected revenues and sales on Wednesday morning, and CEO Marvin Ellison said in a statement that sales have increased thanks to “broad demand driven by the consumer’s continued focus on the home.”
Still, rising interest rates can ultimately be a problem for Home Depot and Lowe’s. While the Federal Reserve is expected to hold its key short-term interest rates close to zero for the foreseeable future, long-term bond yields have started to climb. And mortgage rates are more affected by the 10-year Treasury than by the Fed.

In an ominous sign, Home Depot declined to provide any direction for 2021. Its shares fell 3% on the news.

“Increased demand for single-family homes has boosted home sales and home prices,” Richard McPhail, Home Depot’s chief financial officer, said on a conference call with analysts Tuesday. “However, great uncertainty remains regarding the course of the pandemic, vaccine distribution, short-term fiscal policies and how these developments will affect the wider economy and ultimately consumer spending.”

For now, it doesn’t seem like consumers are too concerned.

The latest housing market figures still provide a healthy picture. Consumers are eagerly looking for more space and are willing to pay increasingly higher prices for homes.

S & P / Case Shiller and the Federal Housing Finance Agency reported a monthly increase of more than 1% in their latest home price reports on Tuesday.

“Both studies suggest strong momentum and support our view that the housing market remains firmly on the ground,” said Blerina Uruci, an economist at Barclays, in a report.

The strength of the housing market is also helping to raise wood prices, which has also boosted Home Depot. Ed Decker, the retailer’s president, said on the earnings call that “during the fourth quarter, prices for both framing and panel lumber” rose sharply, increasing overall sales.

Forestry companies have benefited from the housing boom and rising timber prices.

Two timber exchange traded funds with the ticker symbols of WOOD and CUT – de iShares Global Timber & Forestry WOOD and Invesco MSCI Global Timber CUT ETFs – are each up more than 5% this year and both are up more than 25% in the last 12 months.

Builders remain confident that the housing boom will not end yet.

Toll Brothers TOLL reported earnings and sales after the market closed on Tuesday that easily exceeded analyst expectations.

“The housing market remains very strong, driven by a tight supply of new and existing homes for sale, favorable demographic trends, low mortgage rates and an increased valuation of home ownership,” said Douglas Yearley, Jr., CEO of Toll Brothers in earnings. release. He added that he expects these market conditions to “continue for the foreseeable future”.

Source