Slumping Housing Market Affecting Everyone
Wednesday, November 15, 2006
From the Globe and Mail: "First, Americans quit buying homes. Now, they may have stopped fixing and furnishing them too.Home Depot Inc. reported a 3-per-cent drop in profit in the three months that ended in October, amid mounting evidence that the U.S. housing slump is getting worse.
"I don't think we've seen the bottom yet, and I don't see anything that says it's going to get significantly better in 2007," said Bob Nardelli, Home Depot's chairman and chief executive officer.
Mr. Nardelli said job losses in the home construction market are the worst he's seen in 35 years, and the pain is starting to spread to the home renovation market.
"The loss of jobs . . . in the home construction market is at unprecedented levels," Mr. Nardelli told analysts on a conference call yesterday. "Home builders [are] basically writing off earnest money and liquidating land. We're starting to see a lot of that unemployment find its way over to the small repair and remodel contractors."
But there were also sharp declines in building materials (down 0.3 per cent), furniture (down 0.7 per cent) and department store sales (down 0.7 per cent). Over the past three months, sales of building materials have plunged at an annual rate of 10.6 per cent.
"The housing slowdown left its grimy fingerprints all over this report," BMO Nesbitt Burns economist Douglas Porter said in a note to clients.
Lower gasoline prices don't seem to be causing consumers to spend elsewhere, as many economists had predicted. Even if you strip out volatile gas, food and auto sales, all other retail sales rose a meagre 0.1 per cent October.
"People are being very cautious," said Ian Shepherdson, chief North American economist at High Frequency Economics. "The housing crunch is now hurting."
