The highs and lows of real estate affect Lowe’s Companies, Inc (NYSE:LOW)
The national Association of Realtors (NAR) has released a report on existing-home sales in June. This could be a sign of a storm brewing on the horizon for home improvement companies like Lowe’s Companies, Inc (NYSE:LOW). This is not only because sales in June were dreary. Home Improvement companies’ profits are directly-liked to the sale of new homes and the subsequent decoration, or remodeling homes that already exist. Buying an existing home and redecorating translates into higher expenditure for the homeowner. This is exactly where LOW wants to be.
The June report released by NAR shows that in comparison to May, there was a 2% increase in the inventory of existing homes that were up for sale. But what is not so heartening is the fact that the supply of existing homes in June 2012 was 7.6% higher than it is in the current year. There are a few relevant questions that affect the way the fortunes of home improvement companies trend.
Has the existing home inventory in the U.S dived as deep as it could or has it already hit rock-bottom? If it has touched that point already, is it going to stagnate at that point for long? What is the state of new home construction and is that going to affect the existing home industry in any way?
In January, inventory touched 1.85M homes for sale. This has been a 12-year low for the industry. Over the last few months, it has been emerging from that crater as the home-buying season took off to a good start. To a certain degree the unavailability of new homes for sale is the reason for this bright spot.
In May, new home sales touched its seasonally-adjusted yearly rate of 476,000 which is still just around a third that the yearly rate stood at when the housing industry was at the peak of a boom in 2005. Homebuilders are gearing up again and for companies’ like Lowe’s Companies, Inc (NYSE:LOW) this is definitely a good sign.