Jim Cramer believes that Home Depot (NYSE: HD) could post less-than-stellar numbers when it releases them this week. However, he views the climate catastrophes that have wrecked homes from Florida to Los Angeles as possibly helping future earnings.
Home Depot’s shares have had a tough year, up only 6% compared to the S&P 500’s run-up of 21%. A weak housing market is one critical reason for the drop. In January, the sales of previously owned homes dropped 4.9% from December, according to the National Association of Realtors.
One reason for weak home sales is a rise in prices. In January, median listing prices hit $396,900, the highest of any January since the data was first collected. NAR Chief Economist Lawrence Yun commented, “Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve. When combined with elevated home prices, housing affordability remains a major challenge.” The National Association of Home Builders recently reported that, on a home priced at $450,700, the difference in monthly payment between mortgages at 3% compared to 7% is $1,000 a month
Cramer’s theory about Home Depot’s future earnings seems well-founded. The AP reports, “The LA fires destroyed more than 16,000 homes, businesses, and other structures in upscale Pacific Palisades and working-class Altadena.” Hurricanes Helene and Milton destroyed or damaged an estimated 126,000 homes.
Not every home in LA or the areas hit by Helene and Milton will be rebuilt, but tens of thousands will. And that doesn’t include homes in other areas of the nations where disasters have hit.
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