Lowe's Companies Inc. (LOW)

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  • commenter
    SHartwell
    May 09 04:27 PM
    The WSJ Is Wrong on the Housing Crisis [view article]
    "Existing Inventories" is a difficult concept.

    Suppose I'm in Chicago and want to move to Denver. I put my home on the market (that's 1 home in existing inventories). But I ask too much and it doesn't sell. And I won't buy a house in Denver until my Chicago home sells.

    Jim lives in Denver and wants to move to Miami. He puts his house on the market (that's 2 homes in inventory). It's ideal for me, but I won't buy it because my house hasn't sold.

    Sallie lives in Miami and wants to move to Chicago. She puts her home on the market (that's 3). It's ideal for Jim, but he's not biting because I haven't bought his house.

    This situation creates an "existing inventory" of three houses for sale. Months of inventory looks even worse, because homes aren't being sold at a very fast pace.

    But then I finally get realistic I finally get realistic about price and sell to Sallie. I buy Jim's house. Jim buy's Sallie's house. POOF! The "existing inventory" is gone - without any need for household formation...

    Because of this, many people focus on the number of vacent houses. This number looks big (all time high, they say), until you realize that it's been on an uptrend for 40 years - and it really isn't that much more than it was 1, 2 and 5 years ago.

    The builders are currently building at a rate much lower than household formation, whereas the problem was created when they built at a rate much higher than household formation. This will eventually work itself out - just like any commodity cycle.

    The investment decision rests on just how long you think this will take...     Reply
  • commenter
    redriver
    May 09 03:05 PM
    The WSJ Is Wrong on the Housing Crisis [view article]
    In the past only 6% of retirees will have moved more than 50 miles away from where they raised their children. I am sure that the coming baby boomer retirement wave will increase that percentage but not by the implied amount I constantly see in these types of articles (both bull and bear stances). Also, 85% of baby boomers will need their social security benefits to make "retirement" possible. Combine that with the fact that most then will have to sell their current homes in order to purchase a new one in a different location leads me to believe that the baby boomer rescue concept is about as well conceived or thought through as the housing bailout plan. All written as if Peter Pan was the intended reader. Less is indeed the new More and they'll be sure to make it as hip as possible so that they can stomach the taste. Reply
  • commenter
    Polabair
    May 09 10:47 AM
    The WSJ Is Wrong on the Housing Crisis [view article]
    Dear Happy,
    Good jobs...Americans need to buy GOODS and services made and provided by Americans. Look on the bottom of your toaster. That's where the good jobs went.
    Have a nice day...     Reply
  • commenter
    User 191061
    May 09 01:44 AM
    Home Depot Slows Down Expansion; Still Losing Customers to Lowes [view article]
    Bring back Bernie Markus and Arthur Blank, the 2 guys that started HD. They knew how to treat their employees and to run a successful
    business. I'm pretty sure the majority of HD employees are sour and bitter because of the crap management puts them through. I know I worked there 6 years ago. I remember after being there a week in the beginning an Asst. Mgr. came up to me and said, "If you ever pull that Sh-t again, I'll fire your f--king a__." He said that because I told a customer, "If you go get a cart I would be glad to help you load you merchandise." I guess the customer didn't believe they needed to get a cart! That's just one of the mellower stories I have. HD needs to clean up the stores. Find decent management, and please get rid of the day labors in the parking lot. I'm tired of them sitting on my car when I'm in the store shopping. I have never seen a laborer on Lowes property! The day laborers also urinate all over the parking lot . The security guards seem to be amigos with all the day laborers. Maybe the security guards use to be the day laborers. HD treat your employees and customers with respect or you'll go down the tubes just like Kmart.     Reply
  • commenter
    Happy
    Destiny
    May 09 12:53 AM
    The WSJ Is Wrong on the Housing Crisis [view article]
    This article misses a key determinate in real estate demand - New Household Formation. At the same time that seniors are downsizing, young families and will be buying. Out here in California there is a huge, let me repeat, huge number young people who will be forming households in next years and indefinite future. It is the same group of people that all th right wing Republicans are excoriating as the root cause of our trouble. These are the children of the wave after wave of immigrants that have come into the country in the last 15 years. If we would simply realize that these workers children are going to make a contribution to our country, we might be able to make the investment in education for these young people so they can get good jobs, start new businesses, and buy all those homes the old school americans are vacating... Reply
  • commenter
    dlaw
    May 08 05:25 PM
    The WSJ Is Wrong on the Housing Crisis [view article]
    The WSJ focus on new homes is silly. There's 10 months supply of existing homes out there - officially and that represents 10 times the number of new homes. That number may have peaked but, as this article indicates, we should not expect that inventory to go down steeply.

    And most glaring is the WSJ author's failure to either realize or acknowledge that his affordability argument fails to acknowledge that we are arguably in an affordability TROUGH. Mortgage rates may not get back up to the 18% of the 80's the author cites but they are unlikely to go lower any time soon. The author fails to mention that the '91 rate was better than 9%.

    But doesn't that make his argument for him?

    No, because what house owners want to see is rising LIQUIDITY in the housing market. And that's where the WSJ author's argument falls apart. Since the 80's the US market has not only seen a reduction in interest rates, but also a tremendous increase in total credit available for housing. Thus we have seen home ownership RATES in this country have increase dramatically since '94 and peak in 2004. The WSJ author fails to note that the '91 crash in real estate prices was in the middle of ten years where home ownership rate basically went sideways.

    To speak to Vikram's point about household formation, the last time home ownership RATES peaked and fell like this was '80-'81 to '86-87.Banks are lending cheaply, yes, but it is unlikely they will lend more cheaply. During the last fall in home ownership rates, mortgage rates fell about 45% or eight thousand basis points - eight thousand.

    Does anyone think we're going to see 3% mortgages? In 2002 the US mortgage security market surpassed the Treasury market in liquidity. Is anyone anticipating that kind of increase in securitization?

    The problem is exactly household formation. You can call a two-percent drop in home ownership rates a loss of two million *owner-occupied* households. I would not expect landlords to offer a price subsidy for taking up that slack. If we need two million new landlords then housing prices have to get to a place where it is profitable to rent.     Reply
  • commenter
    kingchuck
    May 08 03:42 PM
    The WSJ Is Wrong on the Housing Crisis [view article]
    FINANCING will always be the key to real estate prices. Aside from the normal cyclical up and downturns weighed in by greed and fear, pricing and valuation of usable and relatively desirable homes and real property is a direct function of the availability, cost, and terms of purchase financing or (F.A.C.T). It is the ultimate ingredient that makes or breaks real estate market prices.

    While argument is plentiful for the law of supply and demand to be the governing factor for pricing and valuation, one need not forget that it is financing itself (or FACT) that keys the pricing that directly affects and determines real estate supply and demand cycles.

    Demand for desirable, affordable, and well priced real estate is a given. To measure or predict housing and real estate pricing/valuation trends use the FACT gauge.


    Reply
  • commenter
    gracec
    May 08 02:51 PM
    The WSJ Is Wrong on the Housing Crisis [view article]
    Need some input . Some have said that the tax credit of 250k /500k capital gains exemption spurred some of the boom in home prices (it got factored into home appreciation). They're still selling the no money down thing here in the inland empire which is still scary. By the way, all these people with foreclosures on their credit records what happens to their ability to buy the next house when the recovery happens? Most of the people were young who got caught up and now are mostly upside down in their homes. Also here in the california they have mello roos which is additional tax on new homes on top of your property tax of 1% which sometimes is double (1.7-1.8 depending on where you live) to pay for the cost of new schools, new roads, etc and this is an indefinite tax. It doesn't go away after a few years - it's unclear when it stops. With the avg home price in california that's an additional 6-9k a year in taxes on top of your regular property tax. So most people would rather buy a house which is 8 years old and save on the tax. Plus the empty neigbhorhoods in these new developments are depressing, unkept lawns, renters living near you rather than owners due to all the speculators. The worst parts are the new developments that have HOA -home owner association dues- which are not tax deductible and as more homes are foreclosed I've been hearing from a lot of home owner associations that they're forced to increase the fees because less people are paying the community dues. Also harder to sell. Also what happens when all these high paying jobs are outsourced to china and india or somewhere else? I've got friends who have masters in biology laid off at Amgen who are now working as salesclerks and coffee baristas just to make ends meet. They've been laid off for over 1 yr now. Then we have all those unemployed people from the housing boom- real estate agents, mortgage brokers, and everyone ancillary to that. Reply
  • commenter
    dilettantedu
    de
    May 08 12:25 PM
    My Website
    The WSJ Is Wrong on the Housing Crisis [view article]
    anyone who would rely on the wsj editorial page for objective information would walk into a village of cannibals and ask "what's for dinner?" Reply
  • commenter
    Polabair
    May 08 11:02 AM
    The WSJ Is Wrong on the Housing Crisis [view article]
    Housing rebound in 2009? Maybe a dead cat bounce...Middle class working folks buy houses to raise kids in. Unemployment? got enough room in those cubes for a couple million former working people?
    Have a nice day...     Reply
  • commenter
    Donald E.
    L. Johnson
    May 08 10:18 AM
    My Website
    The WSJ Is Wrong on the Housing Crisis [view article]
    The WSJ's dishonest position in favor of illegal immigration has undermined its credibility on all topics. But I don't think it ran the housing article because of ideology. The author wrote a good piece and presented an interesting perspecitve, and if he wanted to stick his neck out, the Journal provided the limb.

    My first reaction as a housing bear was that the author thought he could talk the market into bottoming out. Won't happen.

    Having said that, has anyone looked at the new housing and existing housing markets not just as markets that are correcting cyclically but as as a new price war? One reason builders PEs remained low during the boom was that investors anticipated this correction and weren't willing to overpay for companies that historically have gone through booms and busts like the one we're experiencing.

    Why, then, have builders' stocks rallied this year? Fools rush in? Speculators and swing traders play the bounce? HIgher interest rates, tighter lending standards, poor consumer sentiment and rising unemployment will restart the housing boom at still very high and unaffordable prices? I never trade against the tape, but sometimes I refuse to go along.     Reply
  • commenter
    Richard Shaw
    May 08 10:10 AM
    My Website
    The WSJ Is Wrong on the Housing Crisis [view article]
    Mijka,

    You have generated a solid threat of discussion. That's a good thing.

    Even though comment threads have a general tendency to lean toward criticism more than toward praise, stimulating a critical discussion is better than writing articles that receive no comments at all.

    Demographic trends are one of the most powerful drivers of long-term investment trends. You are on track by focusing on demographics as a force in the market.

    I don’t have a view on whether the particular data you chose is the "right" data or if your conclusion would be modified by incorporating some of the additional factors mentioned by some of the commenters, but I do believe your intent to uncover the demographic underpinnings of the long-term housing market is a good idea.

    In addition to housing, demographics will drive other key elements of our economy and the economies of other countries. One that may be of interest to someone out there is the likely portfolio allocation decisions of that growing 70+ cohort in terms of stocks versus bonds.

    If they use traditional rules of thumb and heavily allocate to bonds, there may be noticeable interest rate consequences, or equity demand consequences. On the other hand other strong forces such as international investor behaviors, government deficit or surplus budget conditions, and the proportion of the population in an asset accumulation stage versus those in an asset consumption stage will be apply other forces. That area might be fertile ground for research.

    Some high profile demographics are likely to drive economics in other parts of the work too. The excess of young males in China is an issue. The graying of Japan and Europe versus the slower graying of the US due to immigration rates is an issue.

    The apparent fact that literacy is a driver in economic development, and the fact that literacy is very low in some countries may help predict where economic growth in the emerging world is more likely to be high and low.

    The current and future shape of the population pyramids (which you are in effect describing in a different graphical format); can be useful in predicting consumption patterns for a number of goods and services.

    As a baby-boomer myself, I have watched my cohort distort every thing it encountered. We were like the picture in Antoine de Saint Exupery's children's book "The Little Prince" of the snake that swallowed the elephant. We expanded demand beyond supply for each new private or public good or service appropriate for our then attained age. As we aged further, we left supply greater than demand for goods and services no longer of demand to us – the follow-on group was smaller in size than our own. That created real economic consequences and flux.

    Anyway, I am happy to see dialog around demographics as an investment driver and hope that you and others will keep it going here and with other articles.

    Richard Shaw
    QVM Group LLC
    Reply
  • commenter
    MikeHr
    May 08 09:53 AM
    The WSJ Is Wrong on the Housing Crisis [view article]
    One thing that no one mentioned is the still high cost of home ownership. The housing mania was fueled by zero down, stated income loans that pushed prices up to unrealistic levels. It was the greater fool theory at work. I'll buy this home for this absurd price because in a year I'll sell it to some other fool and make a pile of money. Some people did make a lot of money. Now some people are losing a lot of money. A debt pyramid can only go so high before it collapses. This is what we are experiencing now. With the mortgage market going back to traditional requirements (20% down and documented income and assets), the dynamics have changed. The debt engine that drove prices to unrealistic levels is gone. Do the math. A $1 million home, common in the SF Bay Area, now requires a $200,000 down payment and monthly payments of $4,860, plus property taxes of approximately $1,100 per month, plus insurance, plus utilities and other expenses. Reply
  • commenter
    altoidsman
    May 08 12:01 AM
    The WSJ Is Wrong on the Housing Crisis [view article]
    I've had the same thought for a while. As soon as the short term starts looking up for the housing market, this long term trend will start to kick in. Reply
  • commenter
    Vikram
    May 07 11:00 PM
    My Website
    The WSJ Is Wrong on the Housing Crisis [view article]
    The arguments presented in this article cherry-pick certain statistics to put a negative spin. The number of homes needed is primarily determined by what is called 'household formation'. A new household is formed when a person or a couple move out from shared housing (parents, siblings) and get a home of their own. Along with demographics, a key factor in the formation of new households are economic. When the economy is good and jobs are plenty, young people move out and get their own homes (rental or owned); when the economy is bad, they move in back with their parents/siblings.

    For the article to be credible, the author should have compared the new household formation rate instead of selected demographics. A decline in home ownership rates does not mean a decline in housing demand. A lot of people rent their homes. The distribution between renters versus buyers which may change, not the overall demand for homes.

    There is a misconception that as soon as boomers hit retirement age, they will sell their homes and go and live in a nursing home. Thanks the advances in health and technology many boomers are in no rush to quit their lifestyle. In fact there are many studies which suggest that the anticipated rush to the sun-belt by retiring boomers is over-hyped. People do not dump the community they have spent a life-time in just to enjoy warmer weather. Even if they decide to down-size and move to a smaller home, they are likely to buy another home in the same community.

    When it comes to state of the housing market, new homes are a critical metric since they correspond to the additions to the housing stock; existing homes do not change the total number of homes. Further, unlike home owners, who in many cases are not in a rush to sell, home builders are much more likely to reduce prices to drive sales since an unsold home costs them a lot of money. Home owners continue to live in their home, while they wait for their home to sell; something which contributes to the stickiness of home prices in down-cycles. The downward pressure on home prices is primarily driven by sales by builders; home owners typically are the last to reduce their price. As a result if new home prices stabilize, existing home prices will follow quickly; existing home market lags the new home market by a few months, but it still follows it.

    And finally the comment about Traxis' equity exposure to home builders and financials are irrelevant. Any smart money manager will be building a position in these cyclical sectors after they have been beaten down so much; they will recover as the economy moves out of the downturn.     Reply

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