Home Improvement Companies and the Housing Market

In 2007-09, it seemed as if the housing market would remain in a continuous state of limbo for an indefinite amount of time. 2012 saw a dramatic restabilizing of the housing market, however, and substantial growth continues to occur.

While this is great news for those looking to sell their homes, it?s also extremely beneficial to home improvement companies and has had a dramatic impact on the industry.

Home Depot (NYSE: HD), one of the biggest companies in the home improvement industry, saw a significant revenue increase in 2012, causing the company?s stock to go up by 40%.

According to Trefis, the company attributes its growth in 2012 to the restabilized housing market, in which record levels of construction, lower vacancy rates, and lower mortgage rates all have roles. The company is expected to enjoy even more growth as the housing market continues to recover further.

A down housing market can have an all too sobering impact on a variety of industries, especially affecting home improvement companies. Companies such as Home Depot and Lowe?s (NYSE: LOW) have the potential to suffer tremendously when the housing market is in the red, which just a few years ago was the case for many retailers.

An uptick in the market, however, can directly affect associated industries, and it has helped to bring home improvement companies back on top in 2012-2013.

When the recession began in 2007, the housing market immediately took a dive. It floundered for a few years, but eventually the increase in job creation helped to bring the housing market back to where it belonged.

According to The Guardian, the supply of U.S. homes is at its lowest level in 13 years, providing further evidence that the market continues to improve. Prices are going up, and boarded-up apartments are being reclaimed and lowering the vacancy rates in cities. Americans are finally interested in buying again.

It?s not just an uptick in the economy that has played into this resurgence in the home improvement industry, however; there are other factors at work. Hurricane Sandy, for example, had a tremendous and lasting impact on homeowners, given the fact that repairs still need to be made on countless homes and buildings affected by the storm.

The impact of Sandy on the home improvement industry is expected to last well into 2013 and perhaps beyond, as it is expected to be years before significant amounts of improvements can be made.

There?s another factor also influencing this shift. According to Bloomberg, the stimulus enacted by Federal Reserve Chairman Ben Bernanke has had a major impact on the growth of the housing and auto markets, keeping interest rates low and making it easier for potential buyers to get the loans they need.

Some wonder whether or not growth in these industries is more attributable to the stimulus than actual improvements in the U.S. economy, leading to speculation about how long the market will continue to grow.

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While home improvement companies have generally benefited from a better economy and likely the stimulus, some aren?t doing quite as well as others. Lowe?s, for example, has noticed a decline recently. Its shares have dropped 4.8% from $35.86, according to Bloomberg, which is the most significant decline seen since August 20th of 2012.

Nevertheless, the company still expects to experience growth in 2013, even with setbacks such as this.

With vacancy rates down and other obvious improvements continuing to affect the housing market and the economy, it?s likely that 2013 will be another banner year for home improvement companies.

Construction rates are higher than they have been in years, and the spring/summer of this year is likely to attract a broad new base of potential homeowners. If unemployment rates continue to fall and average salaries rise, the market will likely see even more growth than it has up until now.

Home improvement companies need to do everything they can to ride the growth in the housing market, focusing on improving their stock and keeping the momentum going.

Home Depot looks poised to have an excellent year, with Lowe?s not falling too far behind. Shareholders seem confidence that these stocks are on a solid path, even if the days of significant, wild growth may have been left in 2012.

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Source: http://www.wealthdaily.com/articles/home-improvement-companies-and-the-housing-market/4030

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