Blake: Housing recovery is still kicking
Home Depot’s sales for the first quarter were below expectations, but don’t blame the housing market, blame the weather.
That’s how Atlanta, Georgia-based Home Depot CEO Frank Blake sees the events of the first quarter. The company posted sales of $19.7 billion, up 2.9%.
The colder-than-last-year temperatures of spring weighed heavily on sales, he said. But the company expects a weak first quarter to be counterbalanced by strength in the seasonal business in the second quarter. Such a counterbalancing has a name in Atlanta – “the bathtub effect.”
Meanwhile, reports of a demise of the housing recovery are highly exagerated, he said.
"There has been a fair amount of discussion about the fact that many indicators in the housing market have softened over the last several months, leading to the question of whether this indicates that the housing recovery has run out of steam,” Blake said. “As we parse the data from our own business, that is not what we see. The core categories in the store remained strong, pro sales continued to grow, our services business grew high single digits in the quarter, and we had another quarter of big ticket growth.”
Growth in stores, he added, will be fueled by home price appreciation, affordability and an aging housing stock in need of repair and investment.
Market Recap: RISI Crow’s Construction Materials Cost Index
A price index of lumber and panels used in actual construction for May 16, 2014
*Western – regional species perimeter foundation; Southern – regional species slab construction.
Crow’s Market Recap — A condensed recap of the market conditions for the major North American softwood lumber and panel products as reported in Crow’s Weekly Market Report.
Lumber: Demand for SPF lumber was not as strong as in the previous couple of weeks. Futures contracts showed losses prior to Thursday’s expiration of the May contract, which created some hesitation in the cash market. Buyers continued to purchase significant volumes of Southern Pine lumber but with a large amount of caution. Good takeaways from yards kept distributors and retailers coming back into the market to purchase more. Moderate sales activity was enough to keep most Coastal species dimension lumber items at, or very near, their prices from the week prior. Green Doug Fir producers had to reduce prices of a few items to move volumes. Inland species lumber traders lamented a market in which they often cannot find the tally and/or the shipment time they need in order to consummate a deal. Mill order files out several weeks for certain lengths forced dealers to turn to distribution. Radiata Pine Mldg&Btr continued to sell easily at published levels or sometimes slightly higher. A few sales of #2 Shop were reported at prices above published levels. Buyers reported having no difficulty finding most of what they needed, but Ponderosa Pine 5/4 P99 was a little harder to acquire and the prices moved up $5. A slower but still steady market was reported for Ponderosa Pine boards. Light inventories that matched demand kept producers in the driver’s seat. Eastern White Pine producers reported improving business in the Northeast. An active sales week for ESLP boards moved prices up for #2&Btr, as well as #3 and #4. Most producers reported a steady sales pace in the Western Red Cedar market, as customers came back in to fill in inventory holes. Prices for dimension and timber items continued to increase.
Panels: Sales activity was quiet in all OSB regions. Mill order files into mid-June, in some cases, were beyond many buyers’ comfort levels. Secondaries concentrated on selling contract loads or previously purchased loads. Much of it sold at $5 to $10 below replacement costs. A modest sales pace in the Southern Pine plywood market kept most prices near prior levels but firm. Buyers continued to digest previous purchases and replenished with moderate volumes when necessary. Wholesalers bought sparingly and continued to sell contract volumes and from dwindling long positions. Many Western Fir plywood buyers remained on the sidelines, digesting previous purchases. Wholesalers also reported a slower pace to their sales and sold sheathing at levels around $10 less than what mills asked. Canadian plywood producers reported steady inquiries and sales. Improving weather, Quebec road restrictions being lifted, and a long Victoria Day weekend, all helped encourage buyers to cover their needs. Particleboard producers in the Southeast reported steady sales and few issues regarding selling a week’s worth of production. A few mills noted a slightly slower pace to MDF sales.
For more on RISI, click here.