- USA Today – Did the economy bust out in the second quarter? GDP report will offer clues
After lackluster economic growth early this year, the government is expected to report this week that the nation’s gross domestic product increased at the fastest pace in three years in the second quarter. The news isn’t expected to be nearly as upbeat for home sales, which have been hampered by low supplies and rising costs. But business investment likely surged despite jitters over widening U.S. trade battles. Despite steady job and income growth, existing home sales have been curtailed by rising mortgage rates and skimpy supplies that have pushed up prices. Sales dipped in both April and May. And pending sales, which track accepted offers but not signed contracts, were weak in those two months as well, suggesting sales last month may been tepid as well, Nomura economist Lewis Alexander says. Economists expect the National Association of Realtors to report Monday that existing home sales rose a modest 0.9 percent in June to a seasonally adjusted annual rate of 5.48 million.
Summary
A cool housing market and hot temperatures are driving outperformance for home improvement retailers.
Comment
This week we’ll see home sales data for June with existing home sales due today and new home sales tomorrow. The charts below show the six-month average for each series in blue. Existing home sales saw this measure peak last April and has declined in each of the past two months. New home sales continue to grow, although constraints on labor and materials are increasingly problematic. These are conditions only the home improvement industry seems to thrive in.
Google search trends for categories related to real estate purchases continue to weaken. The chart shows seasonally adjusted 6-month changes in search trends. Searches for moving and inspections are the exception, rising slightly versus six months ago. Search traffic for listings, financing, and rentals are all lower.
We mentioned last week that U.S. consumers were responding to the heat wave by getting outside and in the water. High temperatures also appear to be driving some consumers to consider an investment in cooling down. The chart below shows steadily rising traffic for air conditioning and swimming pools. We saw the same spike in interest in air conditioning in Canadian search trends on July 12.
We noted some early evidence of stronger global search traffic for home improvement in a post on June 8. That trend appears to have persisted in the U.S. Here we take a more detailed look at U.S. search traffic for related categories. Search interest in home improvements, doors & windows, kitchen appliances, and painting have all recovered from spring declines.
Steady new home sales growth and cooling existing home sales are pushing homeowners to improve what they own. This is a recipe for outperformance by home improvement retailers. The last chart shows the average year to date total return for S&P 500 subindustries. Among real estate related subindustries, home improvement at +8.3% is an oasis of positive returns in an otherwise bleak landscape.