Corporate results are beginning to show the signs of the well-awaited U.S housing recovery. Evidence of this turnaround is seen in the surprisingly strong fourth quarter sales of companies specializing in power tools, carpet fibers, air conditioners, and cement mixers to name a few. These results offer the hope that the bottom of this slide may have been reached and the climb back up has begun.
A recent article in the Wall Street Journal, called Housing Recovery Opens Spigot, sheds company insights into the signs of the U.S. housing recovery. We will share some of the highlights below.
Honeywell International Inc., a company that obtains over 10% of its sales from residential construction, reported an increase of 6% in their sales relating to heating and cooling systems.
“That is the first sign of life that we have had in a while and that is a good sign,” Honeywell CFO Dave Anderson said regarding the promising figures.
United Technologies Corp., which makes Carrier heating and cooling equipment, stated a 20% increase in their fourth quarter sales regarding orders of residential air-conditioning and heating products.
“Housing is what we see leading the economy out of the doldrums” said Greg Hayes, CFO of the industrial firm.
The results of these construction powerhouses are followed by another sequence of encouraging data emerging from the housing market. According to the National Association of Realtors, sales of existing U.S. homes climbed to their highest annual level in five years and reported the largest annual jump since 2004.
Despite the sales increases across the board, the market still must prepare for the long road ahead. It is difficult to anticipate how the market will react when the Federal Reserves retracts its aggressive efforts to keep home loans low.
Nevertheless, the growing optimism of companies invested in the housing market refuses to be discouraged. The potential benefits of the sector’s improvement serve as a beacon of faith for the opportunities to come– the creation of jobs, improvement in consumer confidence, and boost for property-tax receipts for municipalities.
Credit Suisse AG analyst from New York, predicts a rise of 7% in home-improvement spending for 2013 and 8% in 2014. Support for such prediction lies in the reported sales of Stanley Black and Decker, who registered a 5% rise in power-tool orders. This increase is evidence that the American people are investing in home repair.
“As consumers feel more confident in the value of their homes, they tend to make improvements and buy new furnishing,” said Farooq Kathwari, CEO of furniture maker Ethan Allen Interiors.
Even in light of what appears to be a bright future, it is clear this sector is not yet out of the woods. With the clouds of the battle over budgets in Washington still looming overhead, economists hesitate to declare victory just yet. While the broader economic environment is still undeniably fragile, the overall outlook and faith in the housing market remains strong.