Housing cycle still on the upward swing
Home Depot's CEO says home improvement sales are directly tied to the value of homes.
Maybe 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.
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.
If it comes in, you buy it.
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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.
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.
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.
Yes , always remember grasshoppers
YOUR racism= good
Everyone Else's racism = BAD (If they are white)
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$$
Owning a used home is a young man's game. I'm tired of fixing things.
Gas $1,50 higher than day one of Papa Doc reign.
Housing market in a shambles.
Maybe YOU should take your empty , broke head outta MSNBC a$$ cretin and get some facts ?
BTW , ANYTIME you want to challenge ANYONE of the above statements you let me know, cretin.
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 !
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 !
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
At least he is brown nosing a chick today.
( JMHO and has nothing to do with upsetting Rome of course.) ..... Oh and Amazon is Great!
I've put the snow plow on my 4x4....
That box You and Fatty live in,....Better be reinforced..
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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