Concerns about the real estate market are beginning to emerge

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Home Depot (HD) reported earnings and sales that exceeded Wall Street forecasts on Tuesday. Lowe’s (LOW) Wednesday morning also reported better-than-expected earnings and sales, and CEO Marvin Ellison said in a statement that sales rose thanks to “broad demand driven by continued consumer focus on home”.
Still, rising interest rates could be a problem for Home Depot and Lowe’s. While the Federal Reserve is expected to keep its key short-term rate close to zero in the foreseeable future, long-term bond yields have begun to rise. And mortgage rates are influenced more by the Treasury at ten years than by Fed rates.

In a disastrous sign, Home Depot refused to give any guidance for 2021. Its shares fell 3% in the news.

“Rising demand for single-family homes has boosted home rotation and house price appreciation,” Home Depot chief financial officer Richard McPhail said during a conference call with analysts on Tuesday. “However, significant uncertainty remains regarding the course of the pandemic, the distribution of vaccines, short-term fiscal policy and how these developments will affect the economy as a whole and, ultimately, spending. of consumers “.

For now, it seems consumers aren’t too worried.

The latest real estate market figures still mark a healthy picture. Consumers are eager to find more space and are willing to pay ever-higher prices for homes.

S & P / Case Shiller and the Federal Housing Finance Agency reported a monthly increase of more than 1% on Tuesday in their latest housing price reports.

“Both surveys suggest a strong boost and support our view that the housing market remains solid,” Barclays economist Blerina Uruci said in a report.

The strength of the real estate market also contributes to raising wood prices, which has also boosted Home Depot. Ed Decker, chairman of the retailer, said during the earnings call that “during the fourth quarter, frame and panel wood prices” rose, which helped boost overall sales.

Forestry companies have also benefited from the housing boom and rising wood prices.

Two funds marketed in wooden bags with the ticker symbols of WOOD and CUT: the iShares Global Timber & Forestry (WOOD) i Invesco MSCI Global Timber (CUT DOWN) ETFs: have risen more than 5% each year and both have gained more than 25% in the last twelve months.

Builders remain confident that the housing boom is not over yet.

Toll Brothers (TOLL) reported gains and sales after closing the market on Tuesday, which easily exceeded analysts ’expectations.

“The housing market remains very strong, driven by a tight supply of new and existing homes for sale, favorable demographic trends, low mortgage rates and a greater appreciation for home ownership,” the CEO said. of Toll Brothers, Douglas Yearley, Jr. release. He added that he expects these market conditions to “continue in the foreseeable future”.

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