Housing cycle still on the upward swing

Home Depot's CEO says home improvement sales are directly tied to the value of homes.

By Jim Cramer Dec 12, 2013 12:10PM

Home Depot store in Oklahoma City © Sue Ogrocki/APMaybe it's a multiyear move tied not to the Fed but to the need for more homes.


That, in essence, is what Home Depot (HD) CEO Frank Blake said Wednesday night about why he doesn't think we are at the peak or even near it when it comes to both his company and housing-related entities in general.


Home Depot has put more thought into what drives sales than just about any company I have ever seen. Blake and Carol Tome, the amazingly good CFO, have done regression analyses that correlate every aspect of their revenues to gross domestic product, to percentage of growth domestic product spent on homes and to the level of indebtedness versus the value of a house. The most important lead indicator? The value of a home. If it goes up, then you go to Home Depot to invest in that home.


In this analysis, a home is either a failing or a succeeding business, and if it is succeeding, you want to add to it, just as any rational businessperson would do. The Street on MSN Money


When I talked with Blake, I was prepared to go over the usual grounds about what happens when the Fed tapers, blah blah blah. But Blake said the determinant isn't interest rates, it's the innate demographic pent-up demand from household creation. We are simply not producing anywhere near the level of homes we need to be able to replace what we are losing and sate the demand for people who are living with their parents.


That, above all, is the reason he is confident that it's still early in the cycle.


I immediately asked that if that's the case, why doesn't he add stores in the United States, which is a growth prop that so many analysts secretly wish HD would start doing (it added only one this year,).


Nope, Blake said, it's what's sold in the aisles. A combination of innovative products -- like the Cree bulb that last 22 years that he says "you have to include in your will" -- a better supply chain that allows very quick delivery, including a $300 million decision to offer same-day delivery in some cities, and better use of the aisle space will get Home Depot exactly where shareholders want it to be.


I know we are in some sort of a funk right now, but I also believe that while we aren't, perhaps, in as early an inning as Blake thinks we are in this cycle, I do think this top-of-the-ninth feel is just way off base. Jim Cramer on MSN Money


If it comes in, you buy it.


Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.


Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio and uncover the stocks Cramer thinks could be winners.


More from TheStreet.com

Dec 12, 2013 12:34PM
Gotta disagree on this one Jim. Globalization means lower wages and lifestyles.  The ACA alone will pressure wages on health care industries. If workers lose buying power home prices have no where to go but down. If debt and QE were curtailed interest rates would be much higher and the decline would be even more pronounced.
Dec 12, 2013 12:46PM
This story is almost as valuable as the one about Buffalo Wild Wings switching to Pepsi.
Dec 12, 2013 12:35PM
"If the value of a home goes up, the homeowner will want to invest more money into it."  Not sure about this premise.  I see plenty of people pouring money into homes just for the update - the kitchen or bathroom is 30yrs old and worn out, the flooring or fixtures are old, etc...  They aren't basing their decisions on the value of the home, they just want newer stuff. 

HD sells plenty of stuff that really doesn't add value to your home - lawn mowers, appliances, Christmas decorations, garden hoses, power tools, etc...  are all great things to have and you might even need them, but when you purchase them, you really aren't "investing" in your home.
Dec 12, 2013 1:17PM

People are living with their parents because either they don't have a job or are working in a job where they don't  make enough money to rent their own place, let alone buy a house.


People go to Home Depot for DIY repairs and improvements because they can't afford to trade up, which was the norm before the current recession.  Banks aren't lending to your typical HD customer


Housing data, like stock market data is being manipulated.  Let's see how things are this spring, then maybe we can make a judgement.

Dec 12, 2013 12:42PM


Next Time Up makes a good point - that is, the possibility of lower incomes and spending power in the health care industry (along with so many other industries).  You just don't think of doctors as taking pay cuts.


The trickle down of the ACA is going to take many years to reveal itself.  I don't have good feelings about it.



Dec 12, 2013 2:40PM
He really did switch meds !
Yes , always remember grasshoppers
YOUR racism= good
Everyone Else's racism = BAD (If they are white)

Dec 12, 2013 2:37PM
Arizona detective resigns over illegal immigrant status

anyone else read this ?

These bastards are taking over our country , no one pays a dime in taxes and now they become a police officers ?


HOW does that happen ?

Don't they do background checks anymore ?

They should deport her fat, greasy a$$ 


Dec 12, 2013 2:41PM


Owning a used home is a young man's game.  I'm  tired of fixing things.



Dec 12, 2013 2:26PM
Don't have to listen to Fox to see the economy is in a shambles, No jobs , 50 million on food stamps and growing , disability claims doubled in 4 years , LESS jobs today than day one of Papa Doc reign.
Gas $1,50 higher than day one of Papa Doc reign.
Housing market in a shambles.

Maybe YOU should take your empty , broke head outta MSNBC a$$ cretin and get some facts ?
BTW , ANYTIME you want to challenge ANYONE of the above statements you let me know, cretin.

Dec 12, 2013 2:12PM
Brent is a delusional , ex floor sweeping , warehouse working , ex union slug
Dumb as a rock and as broke as one too. ANYTHING he says do the opposite , unless you want to marry your left hand ?

Amazon is great
Amazon is great
Amazon is great

2 cretins with one stone !

Dec 12, 2013 2:16PM
I heard on the radio yesterday , just an excerpt but it went something like
Social security recipients are getting a whopping 1.5% increase per year the last 4 years and the Obuma base of darkies , deadbeats , beggars and illegal's are getting a 10 % increase on food stamps , welfare, but I didn't hear the timeline on that
Per year ?
Per 4 year period ?
Whatever it is , it is obscene.
The people who pay a lifetime of taxes get shafted in favor of generational beggars and deadbeats and illegal's ?
That's our Papa doc supporting his base of beggars, buying votes
IMPEACH the lying fraud !

Dec 12, 2013 2:33PM
Good thing Obuma was all for the drilling in ND, Tulsa , etc , right ?
The ONLY uptick in the economy and surprise Papa Doc was/is totally against it !
That is , until it became popular NOW he's crowing and taking credit for it.
He had ZERO to do with it
All on PRIVATE land
Everything he touches turns to sheet , then he lies about how great it is and these lefty turds lap it up like candy

Dec 12, 2013 2:51PM
Personally I like Lowe's more than HD and how do you know Carol Tome is incredibly good Bobo?

At least he is brown nosing a chick today.
Dec 12, 2013 2:35PM
Tapper is going to kill the market. Tapper is the bane of the Dow. Tapper will take all your money. Tapper is the end of prosperity. I say sell all your valuable stocks all because of Tapper.

( JMHO and has nothing to do with upsetting Rome of course.)  ..... Oh and Amazon is Great!
Dec 12, 2013 12:18PM
Traders who are manipulating tapering are scum ... News Media promoting tapering in headlines are low life ... both have been ripping off honest investors for years  ... they are manipulating for 'dirty' profits and sensationalism ... This is so morally wrong and repulsive.
Dec 12, 2013 3:22PM
Call it right now CGT and Rome.......... is this a sucker rally?
Dec 12, 2013 2:24PM
Sure the Chinese are buying up Detroit. They are also building huge empty apartment complexes and malls in China. They like empty buildings......... even falling down rat infested ones apparently.
Dec 12, 2013 1:43PM
Housing is in a bubble... crazy price gains while no one gets pay hikes. In fact pay keeps decreasing across the board. Its time for the bubble to burst.
Dec 12, 2013 2:52PM
I agree Lowes has higher quality stuff
Dec 12, 2013 2:21PM


I've put the snow plow on my 4x4....

That box You and Fatty live in,....Better be reinforced.. 

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