Concerns about the real estate market are beginning to emerge

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Deposit (HD) reported earnings and sales that exceeded Wall Street forecasts on Tuesday. Lowe’s (LOW) It also reported better-than-expected earnings and sales on Wednesday morning, and CEO Marvin Ellison said in a statement that sales were high due to “large-scale demand driven by continued consumer focus on the home.”
However, raising interest rates could ultimately be a problem for Home Depot and Lowe’s. While the Federal Reserve is expected to keep its short-term key rate close to zero in the foreseeable future, long-term bond yields have begun to rise. And mortgage rates are more influenced by the 10-year Treasury than Fed rates.

In an ominous sign, Home Depot refused to offer any guidance for 2021. Its shares fell 3% on the news.

“Increased demand for single-family homes has led to fluctuations in housing and rising house prices,” Home Depot Chief Financial Officer Richard McPhail said Tuesday at a conference with analysts. “However, significant uncertainty remains regarding the evolution of the pandemic, the distribution of vaccines, short-term fiscal policy and how these developments will have an impact on the wider economy and, ultimately, on consumer spending.”

For now, it seems that consumers are not too worried.

The latest numbers on the real estate market still show a healthy picture. Consumers are eager to find more space and are willing to pay higher prices for homes.

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

“Both polls suggest a strong momentum and support our view that the real estate market remains on a solid footing,” Barclays economist Blerina Uruci said in a report.

The power of the real estate market also contributes to the increase in timber prices, which also stimulated Home Depot. Ed Decker, the retailer’s president, said during the earnings call that “in the fourth quarter, prices for both framing and panel timber” have risen, helping to drive up total sales.

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

Two funds traded on the wooden exchange, with the symbols “WOOD” and “CUT” – iShares Global Timber & Forestry (WOOD) and Invesco MSCI Global Timber (CUT) ETFs – each increased by more than 5% this year and gained both by more than 25% in the last 12 months.

Builders remain confident that the real estate boom will not end yet.

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

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

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