OfflineImpact of Foreclosure Properties on Lowe’s and Home Depot
By kevin | June 2, 2009
The sales performances of home improvement retailers Lowe’s and Home Depot CEOs are closely tied with various stages of foreclosure and the number of foreclosure properties, according to the chief executives of the country’s two largest home improvement retailers.
Robert Niblock, CEO of Lowe’s, explained that Lowe’s sales decline when large numbers of homes are about to be foreclosed. He said that during this stage, homeowners stop doing repairs or improvements because they reason out they are about to lose them anyway.
Niblock also added that it is also common during the foreclosure process for homeowners to take out fixtures they have installed or just simply neglect their houses.
It is when the houses have become foreclosure properties that sales of home improvement products increase, according to both Niblock and Frank Blake, CEO of Home Depot.
Blake explained that when lenders and other sellers prepare the foreclosure properties for sale, they buy paints, lighting and other fixtures to improve the homes before they are listed and sold.
Niblock explained further that when foreclosure properties are finally sold, sales of home improvement products follow sales levels related to any other kind of change in home ownership.
Both Niblock and Blake explained that foreclosures affect their companies’ sales negatively, but foreclosure houses improve their companies’ sales when these are readied for sale and when these are finally bought and further improved by the buyers.
Blake however said that there are more properties going into foreclosures than coming out.
Based on data from the Mortgage Bankers Association, the pace of mortgage delinquency is increasing.
The MBA reported that the share of mortgage borrowers in default by at least one month, including borrowers already in the foreclosure process, is 12.07, the highest level in MBA’s 37-year history.
The association said that even mortgage borrowers who have good credit scores are now being weighed down by unemployment and the recession. Subprime lending is no longer the cause of the new batch of foreclosure properties; prime loans now account for the biggest percentage of new foreclosures, according to MBA.
The four foreclosure-battered states of California, Florida, Nevada and Arizona continue to account for the highest shares of delinquencies. Lowe’s and Home Depot have large numbers of store outlets in these states.
Additionally, the National Association of Realtors reported that about 45 percent of all sales of pre-owned homes in April were foreclosure properties and houses sold in short sales.
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An article found on Forbes addresses the over-improvements made by some with too much money... http://www.forbes.com/2009/07/10/homes-hip-hop-lifestyle-real-estate-hip...
I don't know that Home Depot was helped or hindered, but this is interesting.
The average home price in the U.S. is down 17% from a year ago, according to the latest report from the National Association of Realtors, and having an ATV track in the backyard isn't enough to make a home immune to market forces. Fifty isn't the only one to take a hit. Overly ambitious building plans have come back to haunt other big names like rapper Wyclef Jean and producer Scott Storch, who once made more than some of this year's richest Hip-Hop Cash Kings.
"These young fellas over-improve," says Michele Kolsky, a Realtor with Coldwell Banker in Fort Lee, N.J. "If they go over the top and add all these bells and whistles, their home may not appeal to prospective buyers. When they're ready to move on to the next place, they're wondering why the agent can't sell it."
Florida native T-Pain begs to differ. The rapper-singer-producer ranks No. 9 on this year's list of Hip-Hop Cash Kings and is one of a handful who've made a profit by improving and flipping properties. His first was a 10,000-square-foot home in Atlanta, purchased for $1.325 million in 2006. It featured five bedrooms, five-and-a-half bathrooms and "Club Nappy Boy" in the basement for entertaining his guests. He has since sold that house for $3.8 million and bought a new $3.2 million pad in Atlanta.
Thanks for sharing your comments and the story on over improving a home. It is so true that you want to get out sometimes at least $2 in return for every dollar you put into the project. Good luck on all your deals! Believe and Achieve!
- Joe
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Hi Joe,
People are shopping smart these days. Weighing out what is a true need. I read somewhere that the few companies that are not hurting in this market are dollar stores and fast foods. Continued success.............Lubertha
"GOD IS STILL IN CHARGE, HE IS THE AIR WE BREATHE"
Thanks for the insight and the comments. That is so true and as we find potential deals it becomes more important than ever to not over improve the homes. In our area, people are looking for value and using coupons a lot more. The grocery stores, dollar stores and stores like Wal-Mart have the shoppers. Local restaurants and other speciality stores are feeling the pinch of the economy. Good luck on all your deals! Believe and Achieve!
- Joe
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