Latest / Bloomberg Intelligence / HomeAdvisor's Hunter Sees Top of Multi-Family in 2017 (Audio)

Transcript

HomeAdvisor's Hunter Sees Top of Multi-Family in 2017 (Audio) · Bloomberg Intelligence

• 0:02
  Speaker 1: Global business news twenty four hours a day. It's Bloomberg
• 0:05
  Speaker 1: dot Com, the Radio plus Mobile Act and on your radio.
• 0:08
  Speaker 1: This is a Bloomberg Business flag from Bloomberg World Headquarters.
• 0:13
  Speaker 1: I'm Charlie Pallett. Stocks for falling with bonds after comments
• 0:16
  Speaker 1: from Federal Reserve officials spurred speculation on higher borrowing consumate
• 0:20
  Speaker 1: uneven growth in the US economy. The SMP five D
• 0:24
  Speaker 1: index now down ten points to twenty one seventy nine,
• 0:27
  Speaker 1: a drop there of five tents of one percent. The
• 0:29
  Speaker 1: TAO is down seventy seven points, the drop of four
• 0:32
  Speaker 1: tents of one percent, and naz stack down twenty nine points,
• 0:35
  Speaker 1: the drop of six tenths of one percent. The tenure
• 0:38
  Speaker 1: down three thirty seconds, the yield one point five six percent,
• 0:41
  Speaker 1: Gold up seven to thirteen fifty one, a gain of
• 0:46
  Speaker 1: six tenths of one percent, and crude oil up seventy
• 0:49
  Speaker 1: one cents to let forty five on West Texas Intermedia
• 0:52
  Speaker 1: Crude a gain of one and a half percent. I'm
• 0:55
  Speaker 1: Charlie Pallett, and that's a Bloomberg Business flash. This is
• 1:00
  Speaker 1: taking stock with Pim Fox and Kathleen Hayes on Bloomberg
• 1:04
  Speaker 1: Radio Home Depot, new home construction both up very nicely. Today.
• 1:10
  Speaker 1: We have the housing starts numbers soaring suddenly in July,
• 1:15
  Speaker 1: and we have home Depot, the world's largest home improvement retailer,
• 1:19
  Speaker 1: posting second quarter profit that rose nine point three percent.
• 1:22
  Speaker 1: Who compact tie it all together for us. Well, he's
• 1:24
  Speaker 1: in studio today, Brad Hunter, chief economist at home ed
• 1:28
  Speaker 1: Advisor Bred. Welcome back. Well, thank you, Kathleen. Well, let's
• 1:32
  Speaker 1: start with home Depot, home improvement, all those trends, because
• 1:35
  Speaker 1: in your work at home advisor, with a home advisor
• 1:38
  Speaker 1: does helping people find these kinds of services and things online,
• 1:40
  Speaker 1: This is right up your alley. You have an interesting
• 1:43
  Speaker 1: statistic that you're seeing growth in large ticket items up
• 1:47
  Speaker 1: eight percent, eight percent in nine plus dollar items. Uh.
• 1:52
  Speaker 1: This is helping people in particular, really helping to drive
• 1:55
  Speaker 1: those earnings. Yeah. So what's happening is we're seeing some
• 1:59
  Speaker 1: differ maintenance projects and deferred home improvement projects finally get going.
• 2:04
  Speaker 1: And what's happened is people are finally at the point
• 2:06
  Speaker 1: where they're feeling okay about their income and they're feeling
• 2:09
  Speaker 1: great about the equity they have in their homes. You know,
• 2:13
  Speaker 1: home equity has doubled in the last four years and such. Yeah,
• 2:17
  Speaker 1: I mean it's you know, it's a multiplier, right when
• 2:19
  Speaker 1: you've got get an increase in home prices that we've had, Uh,
• 2:23
  Speaker 1: it just multiplies it when it gets to home equity.
• 2:26
  Speaker 1: So that means people feel wealthier, they feel more secure,
• 2:29
  Speaker 1: they feel well, and they can also get home equity
• 2:32
  Speaker 1: loans if they want to home equity lines of credit
• 2:34
  Speaker 1: or increasing. And so what's happening is they're taking on
• 2:38
  Speaker 1: larger projects, They're buying larger items from home depot and
• 2:42
  Speaker 1: so on, and they are also taking on more of
• 2:45
  Speaker 1: these whole room, whole kitchen, whole bathroom, garage remodels, that
• 2:49
  Speaker 1: kind of thing. I know that you spent a lot
• 2:51
  Speaker 1: of time reading remodeling magazines, So maybe you can enlighten
• 2:55
  Speaker 1: us just a little bit about the divergence between the
• 2:58
  Speaker 1: mainline retailers such as Mace, these Nordstrom calls and of
• 3:02
  Speaker 1: course homep depoone will get lows results tomorrow because back
• 3:05
  Speaker 1: in May, I'm reading your note, you said consumers are
• 3:08
  Speaker 1: becoming more cautious. But that's got positive implications for the
• 3:12
  Speaker 1: home improvement sector. Tell us why nesting is investing. That's
• 3:16
  Speaker 1: the term I used in that article. And what I
• 3:18
  Speaker 1: mean by that is that people are viewing investing in
• 3:21
  Speaker 1: their home as sort of a defensive investment strategy. You know,
• 3:25
  Speaker 1: they're sort of saying, if I fortify the castle, I
• 3:28
  Speaker 1: know I'm gonna get some money back out of whatever
• 3:30
  Speaker 1: I put into the home improvement project. Um, and certain
• 3:34
  Speaker 1: projects will pay you back a greater dividend than others.
• 3:37
  Speaker 1: Some of them pay you back more dollars than you
• 3:39
  Speaker 1: actually put in. You're talking about blown insulation. I think
• 3:42
  Speaker 1: that actually talking about Remodeling magazine. They have the cost
• 3:46
  Speaker 1: versus value report they do once a year, and they
• 3:48
  Speaker 1: found that that was, um the highest payoff thing that
• 3:53
  Speaker 1: can you can do to your house if you don't
• 3:55
  Speaker 1: have proper insulation. You add that you get the energy benefits,
• 3:59
  Speaker 1: and and that's recent ailable you can add to the
• 4:01
  Speaker 1: price of the house. You know. You've also found out
• 4:04
  Speaker 1: not too surprising that the most money is spent at
• 4:06
  Speaker 1: home just after someone moves in and just before they
• 4:09
  Speaker 1: move out. It seems all of this, uh, this trend
• 4:13
  Speaker 1: is being driven though so much by the fact that
• 4:15
  Speaker 1: mortgage rates are so low. So if you want to
• 4:18
  Speaker 1: sell your house lots more UH sellers who can do it.
• 4:23
  Speaker 1: If you want to spruce up your house, you can
• 4:25
  Speaker 1: refight at a much lower rate. Banks they make you
• 4:28
  Speaker 1: drum jump through a thousand hoops, but but they'll do
• 4:30
  Speaker 1: it right. This seems to be a very important part
• 4:32
  Speaker 1: of the trend to Yeah, it's a great leading indicator
• 4:35
  Speaker 1: to look at when you're looking at home improvement. I
• 4:38
  Speaker 1: call it churn, which is basically the turnover of homes.
• 4:41
  Speaker 1: Um you know, four or five oh the homes are
• 4:43
  Speaker 1: being turned over, which is about average. So we still
• 4:46
  Speaker 1: actually have some runway to go to to get above that,
• 4:49
  Speaker 1: which was where we would normally get to at this
• 4:51
  Speaker 1: stage in a recovery. But what's happening is, uh, you know,
• 4:56
  Speaker 1: whenever somebody is getting ready to sell their house, they
• 4:58
  Speaker 1: have to do some home improved work because they need
• 5:00
  Speaker 1: to get it ready to pass inspections. They have to
• 5:03
  Speaker 1: make it, you know, increase the curb appeal and all
• 5:05
  Speaker 1: of that. And then after the person buys the house,
• 5:07
  Speaker 1: they want to customize it and make it more personalized themselves.
• 5:10
  Speaker 1: So it's a double hit if you think that this
• 5:12
  Speaker 1: is also going to increase insurance companies profits because I mean,
• 5:17
  Speaker 1: if you're going to see more home turnover, that's typically
• 5:20
  Speaker 1: when you get sent that flyer in the mail that
• 5:23
  Speaker 1: says before you you know, re up with your existing ensure,
• 5:26
  Speaker 1: call us now and we'll get you know that kind
• 5:28
  Speaker 1: of sure that you know. There's a lot of kind
• 5:30
  Speaker 1: of spinoff effects, and that's one of them. Another one
• 5:33
  Speaker 1: is UH inspection services start to spike up. And we're
• 5:36
  Speaker 1: seeing that in our own numbers, and we track more
• 5:39
  Speaker 1: than ten million data points each year within Home Advisor.
• 5:43
  Speaker 1: That is the number of people who are actually coming
• 5:45
  Speaker 1: through our online network to find a professional of some
• 5:48
  Speaker 1: kind of and that includes movers, and it includes inspection services.
• 5:52
  Speaker 1: And these are the kinds of things that are spiking
• 5:54
  Speaker 1: up every time somebody moves. Housing starts UH up pretty
• 5:59
  Speaker 1: sharply last month, the one point two million units at
• 6:02
  Speaker 1: an annual rate. I'm looking at my Bloomberg to see
• 6:05
  Speaker 1: the last time we haven't been that. We haven't been
• 6:08
  Speaker 1: that high in a while. But but here's the way.
• 6:10
  Speaker 1: I don't see it as a particularly strong report. And
• 6:13
  Speaker 1: here's why. If you look at UH, look below the surface,
• 6:16
  Speaker 1: below the headline, you see that single family it was
• 6:18
  Speaker 1: actually completely flat, essentially up point five. I call that
• 6:22
  Speaker 1: flat given the you know, confidence in a rule that
• 6:25
  Speaker 1: you have. So all of the increase was multi family,
• 6:29
  Speaker 1: and I think that multifamily doesn't have much runway left.
• 6:33
  Speaker 1: I think multi family cannot continue to increase the way
• 6:37
  Speaker 1: it has. And I think that probably by some time
• 6:40
  Speaker 1: next year, we'll see the top in multi family and
• 6:43
  Speaker 1: starts will start to trend back downward after. Is that
• 6:46
  Speaker 1: because the inventory is there so much more capacity, There's
• 6:48
  Speaker 1: just a lot more places to rent now? Is that way? Well,
• 6:50
  Speaker 1: that's right. What's happened is uh, so much new construction
• 6:54
  Speaker 1: has happened, and there's a lot of buildings that are
• 6:57
  Speaker 1: still under construction. You know. These kinds of especially the
• 6:59
  Speaker 1: luxury high rise buildings, take three years to complete, so
• 7:03
  Speaker 1: by the time they actually get completed, you know, and
• 7:06
  Speaker 1: some of them will complete next year, and I think
• 7:08
  Speaker 1: that they're going to find maybe a little softness in
• 7:10
  Speaker 1: the rents compared to what they performed. I want to
• 7:13
  Speaker 1: thank you very much for coming in and spending time
• 7:14
  Speaker 1: with us as always, Brad Hunter, chief economist at Home Advisor,
• 7:19
  Speaker 1: telling us all about the home improvement sector and the
• 7:21
  Speaker 1: housing industry. Shares of Home Depot now down about six
• 7:25
  Speaker 1: tenths of a percent. The stock of Home depot Let's
• 7:29
  Speaker 1: up about three percent so far this year, and it
• 7:32
  Speaker 1: pays a two percent dividend. You're listening to taking stock.
• 7:35
  Speaker 1: I'm pim Fox my co host Kathleen Hayes. This is
• 7:39
  Speaker 1: Bloomberg coming up at the plans who exit Obamacare insurance
• 7:49
  Speaker 1: exchanges in eleven of fifteen states and why of three
• 7:52
  Speaker 1: hundred million dollars and expected losses tied to them this year?
• 7:55
  Speaker 1: What does it mean for the insurer? What does it
• 7:56
  Speaker 1: mean for the industry. That's coming up on Bloomberg Radio.