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Home Improvement and the Housing Rebound

Summer Months Bode Well


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By Erik Neilson
Tuesday, May 21st, 2013

Homeowners have a lot to be excited about these days. With economic woes of all sorts plaguing not only the U.S. but the rest of the world as well, one thing that Americans can be happy about is the fact that the housing market – so heavily shrouded in despair for years – has finally bounced back.

home depot cartsCompanies specializing in home improvement materials could stand to benefit quite a bit from an uptick in the housing market, especially if things continue to move in a forward direction.

Goldman Sachs (NYSE: GS) has issued a new research report detailing its predictions on the future of the home improvement industry, leading investors and homeowners alike to perk their ears. As far as Goldman Sachs is concerned, the success of home improvement companies rests heavily upon the improving housing market, and this could be disrupted if the market takes any sort of significant fall.

Results may not come especially quickly, either – it could take until after the 2nd quarter for reliable numbers on both the housing market and the state of home improvement companies to surface.

While Goldman Sachs would never be quick to offer up hasty investment advice, it appears as if the company is more bullish on the home improvement industry than many might think.

According to CNBC, GS has raised its price target for Lowe’s (NYSE: LOW) over the course of the next 12 months to $46, giving the company a “buy” rating. While Goldman Sachs remains neutral on Home Depot (NYSE: HD), it has risen its 12 month target to $81.

The Housing Market

There’s no getting around the fact that the housing market has seen a significant rebound, especially when compared to what was occurring during the Great Recession. While it would be easy to assume that it’s all uphill from here, the fact is that 1st quarter numbers may be less than some analysts expected.

Less-than-ideal weather is likely to blame in the case of weak numbers, as the country suffered an exceptionally chilly start to 2013.

This may not seem like the best news, but there is plenty to be hopeful for. Americans by and large are looking towards buying and building now that spring is in the air and summer is fast approaching.

The general consensus amongst homeowners seems to be that spending is more foreseeable in the near future than it was a year ago this time, which bodes well for the future of the market.

With the housing market likely to to see a continued rise, it should be expected that the home improvement industry will see similar gains. Shares of Lowe’s and Home Depot have been in flux ever since news that 1st quarter housing market numbers might not end up being quite as impressive as expected. But an ever-improving market will do nothing but add value to stocks in this arena.

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Housing Outlook

Investors have all the rights in the world to be discerning when it comes to the housing and home improvement markets. After all, the recession seen just a few years ago is a painful reminder of just how wrong things can go with these markets, and it has surely scared a great deal of people away from these sectors entirely. With an ever-improving outlook, however, these fears are becoming less and less valid.

Given the fact that 1st quarter numbers may be somewhat marginal, it could take some time for investors to see any significant improvements in home improvement stocks. This is to be expected, however, and should not be viewed as an indication of how things might end up in the future.

Once the ball gets rolling, it’s fair to assume that these stocks could see rapid growth. Those who exercise patience may find themselves rewarded over a period of time, especially if the housing market continues to improve.

With warmer weather quickly approaching, the housing and home improvement markets are likely to see a sturdy uptick, which will help to push the U.S. economy in a forward direction.   

 

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