Home improvement retailers raise the roof

The results of the two retailers seem to dispel the bearish theory of consumer behavior. One concern was that rapid inflation of raw materials motivated consumers to postpone or cancel projects. The company said in a statement on Tuesday that the price of lumber products, which sold for $ 9.55 at the Home Depot about a year ago, has quadrupled to $ 39.76. Still, timber was one of the top performing categories in both the Home Depot and Rowe last quarter.

Another concern was that the strong demand from do-it-yourself consumers quickly diminished, many of which were caused by momentary pandemic habits. While both retailers report stronger demand from professional customers, DIY demand is still growing at a healthy pace, and so far it doesn’t seem to be the case.

Both companies’ stock prices, despite consistently above expectations, have fallen after announcing explosive results, as in the last few quarters. Investors seem unable to shake concerns that music may suddenly stop as consumers shift their attention and stay away from their homes.

Still, the signs indicate a lasting structural demand for home renovations and repairs. One of the promising signs is consistent sales growth across different regions, regardless of whether vaccination rates are high or not. Rowe CEO Marvin Ellison said in a statement Wednesday morning that sales performance was “a more consistent and broader base” across the market than at any other time in his career.

Outside indicators also draw a bullish picture. The rise in house prices today is underpinned by an actual imbalance between supply and demand. This means the sustained strength of the price. This can trigger ongoing spending. Existing homeowners may find it worth the investment, but sellers can consider remodeling and flipping their home at a higher sticker price. The April 15 forecast from Harvard’s Joint Center for Housing Research’s Remodeling Futures Program showed that spending on remodeling and repairs is expected to increase at a higher rate than the previous year’s level by the end of 2021. The program uses several economic indicators, such as home price index, home start, remodeling permit, etc., which are strongly correlated with remodeling spending.

After reaching their historic highs in early May, The Home Depot and Loews returned some profits. The Home Depot is currently trading 22 times its 12-month earnings, while Loews is trading 18 times. Both are only slightly higher than the average for each of the five years.

Home prices look ridiculous. By comparison, home improvement retailers seem to be affordable.