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23 August 2013

Housing Market & Home Improvement

According to the Home Depot’s CEO, Frank Blake, the home improvement company is on the rise with its first double-digit gain in sales since 1999 and the highest quarterly transaction count in its history. The rise seems to be caused by more than the standard summer fix-it frenzy or an increase in pinterest-aholics. In fact, […]

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According to the Home Depot’s CEO, Frank Blake, the home improvement company is on the rise with its first double-digit gain in sales since 1999 and the highest quarterly transaction count in its history.

The rise seems to be caused by more than the standard summer fix-it frenzy or an increase in pinterest-aholics. In fact, it probably has more to do with the 5.9% increase in U.S. housing starts.

In desirable markets hard hit by the meltdown, such as California and Florida, the home improvement behemoth saw sales drop as much as 20% in 2008. Recently, housing has rebounded in those areas and, as a result, the company’s sales to contractors and professional customers increased faster than those to individual homeowners and other shoppers for the first time since 2008.

“In 2008, the consumer was really focused on core repair and maintenance,” Chief Financial Officer Carol Tome said in an interview. “Fast-forward to 2013: Home prices are better, and as consumers start to see their home price appreciate, they start to view their home as an investment and not an expense.”

Along with the common moving expense of new carpet and a fresh coat of paint, the sales of big ticket, move-in necessary items like washers, dryers and refrigerators are boosting figures.

How long will it last? As with anything related to the housing market, this is impossible to predict. Some say that rising interest rates will force the market into calmer waters. The average rate on a 30-year fixed loan rose to 4.68% in the week ending August 16th according to the Mortgage Bankers Association in Washington. And that was the second time in two months that it’s hit the two-year peak.

“While we see continued near-term margin improvement on strong cost control, we think rising interest rates threaten housing turnover, limiting sales growth,” said S&P Capital IQ analyst Michael Souers. But Home Depot rival, Lowe’s isn’t “overly concerned” as long as rates don’t exceed 6% according to Chief Executive Officer, Robert Niblock.

“The rate increases will likely take some steam out of the recent housing market rebound, but shouldn’t derail it as long as job gains persist, homes continue to appreciate and rates rise more gradually going forward,” he said.

At AfterForeclosure.com we believe that with the recent changes in HUD’s FHA program, the newly relaxed “extenuation circumstances” will open up the market to many more after foreclosure buyers who were previously precluded from buying.  This will bring increased demand to inventory and keep the housing market healthy.

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