Foreclosures Impacting on Shares at Home Depot and Lowe
Foreclosures are having a mixed impact on shares at Home Depot and Lowe according to the top executives of both. It is of importance as new data about increasing pace of foreclosures is rolling in. The shares of Home Depot (component of Dow) traded down 3.0% at $22.63. The shares of Lowe fell by 3.4% and traded at $18.97.
The general pattern is that sales of Lowe dropped as foreclosures increased. At a conference of investors the chairperson and CEO of Lowe Robert Niblock said that with the rise in foreclosures repairs and refurbishing work for all practical purposes ceases. He said, “It’s not uncommon for that home to be neglected or have fixtures taken out” while the house is in foreclosure. To sell it work has to be put in later after the process is over and the banks have repossessed the unit.
The commercial business houses engaged in this sort of work will benefit from it. The lenders hire contractors to attend to the painting and lighting. Niblock added “We’re trying to make sure we garner our share of that business.” Niblock explained that when the house is sold it becomes like any other property and loses the special foreclosure stamp about it. Both the officials opined that the effect on total sales depends upon the houses entering and exiting into and from foreclosures. Niblock analyzed, “If you have more foreclosures coming into the pipeline, it’s probably a net negative.”
Home Depot officials said they are aggressively trying to be involved in the post-foreclosure renovation jobs. Its chairperson and CEO Frank Blake speaking at a meeting of shareholders said, “When houses are sold out of foreclosure that is a great opportunity for Home Depot.” Blake commented, “Unfortunately, in a lot of the key areas of the country, you actually see more [homes] going in [to foreclosure] than coming out.”
According to a recent survey conducted by Mortgage Bankers Association – the National Delinquency Survey shows that the retailers are apprehending an increasing negative impact in some areas. As per its findings 12.07% of the mortgage borrowers were lagging behind in their payments – it being the highest since the long 37 years that the association has been conducting survey.
Borrowers who were hitherto considered to be safe are now showing stress signs – thanks to the effects of recession and unemployment. Today it is not so much the sub-prime borrowers but the majority of defaulters are from the prime category of loans.