Housing affordability continues to rise
U.S. homes became more affordable for the third consecutive quarter, with the Housing Opportunity Index (HOI) rising to its highest level since the second quarter of 2004, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
“Today’s HOI reading shows that 53.8 percent of all new and existing homes that were sold during the first quarter were affordable to families earning the national median income of $61,500,” said NAHB President Sandy Dunn, a builder from Point Pleasant, W.Va.
Dunn attributed the increase in housing affordability to three factors: mortgage rates returning to near record low levels; a $2,500 rise in family income nationwide; and lower house prices.
According to the report, released May 20, Indianapolis maintained its standing as the most affordable major U.S. housing market for the 11th consecutive time in the first quarter. In Indianapolis, 90.1 percent of homes sold in the first quarter were affordable to families earning the area’s median household income of $65,100.
Also near the top of the list for affordable major metro areas were Youngstown-Warren-Boardman, Ohio-Pa.; Grand Rapids-Wyoming, Mich.; Detroit-Livonia-Dearborn, Mich.; and Harrisburg-Carlisle, Pa. Kokomo, Ind., where 95.3 percent of all homes sold in the period were affordable to families earning that area’s median household income of $57,400, was the most affordable smaller (fewer than 500,000 people) metro market.
Los Angeles-Long Beach-Glendale, Calif., held on to its ranking on the HOI as the nation’s least-affordable major housing market for the 14th consecutive quarter. There, just 10.5 percent of new and existing homes sold during the first quarter were affordable to those earning the area’s median family income of $59,800.
Other major metros at the bottom of the housing affordability chart included New York-White Plains-Wayne, N.Y.-N.J.; San Francisco-San Mateo-Redwood City, Calif.; Miami-Miami Beach- Kendall, Fla.; and Santa Ana-Anaheim-Irvine, Calif.
Dale Pond named to media company board
Dale Pond, the former Lowe’s executive, will join the board of Scripps Networks Interactive. The new board is being formed as E.W. Scripps, which encompasses cable networks, newspapers, broadcast television stations, electronic commerce and interactive media services, splits into two publicly traded companies on July 1.
Scripps Network Interactive will include cable TV channels such as HGTV and The Food Network as well as online businesses (shopping portals like Shopzilla).
Aformer executive at Payless Cashways and other home improvement retailers, Pond worked at Lowe’s for 12 years before retiring in 2005 as the executive vp-merchandising and marketing.
Store closings knock Home Depot earnings down
First-quarter net earnings at the nation’s largest home channel retailer fell 66 percent to $356 million from $1.05 billion in the same period last year.
The significant drop in net earnings was due to a one-time charge of $543 million, stemming from the retailer’s plan to close 15 stores and take 50 previously planned new stores off the docket.
Additionally, Home Depot saw a same store sales drop of 7.3 percent.
Net sales fell 3.4 percent to $17.9 billion from $18.56 billion in the same period last year.
“The housing and home improvement markets remained difficult in the first quarter; in fact, conditions worsened in many areas of the country,” said Frank Blake, Home Depot chairman and CEO, in a statement. “We will continue to invest wisely in our core retail business to earn our customers’ confidence and ensure the long-term health of our business.” During the company’s earnings call with investors, Blake said the plan to slow store growth is expected to free up $1 billion over the next three years.
Blake also characterized the plan to close stores and curtail store growth as a disciplined approach to capital allocation, adding, “This discipline and reinvestment in our existing stores will benefit our shareholders, associates and customers.”
Craig Menear, executive vp merchandising, said Home Depot experienced negative sales growth across all departments, except lawn and garden. Most regions were down, but some strength was recorded in the Ohio Valley region, as well as in the company’s Canada, Mexico and China operations, all of which experienced comp store sales growth.
The retailer is planning to concentrate on grabbing market share in several key product categories, namely ceramic tile, faucets and bath fixtures, Menear said.
Chief financial officer Carol Tome said the company at the moment was more comfortable with numbers on the lower-end of the retailer’s full-year guidance for profit from continuing operations. The company currently expects that profit to drop by between 19 and 24 percent year-over-year. Tome also noted that the company took a broad look at its store base in determining which 15 stores in the country to close ??three of those stores were less than three years old, she said.
Check back at homechannelnews.com for coverage of the Home Depot annual meeting of stockholders, slated for May 20.