Home Improvement Stores Profiting During Pandemic
Some experts claim the economy in America has tanked and we’re officially in recession. Other experts claim that things aren’t nearly as bad as they seem, as America’s world standing means they have unlimited credit to accrue as much debt as needed. Though perhaps the answer is a little of column A, and a little of column B, and the fact is that our economy is currently in a serious state of flux. One piece of evidence to examine here, to see if that’s true, would be to look at the profits of stores like Lowes and Home Depot compared to the otherwise huge downturn of the real estate market in general.
How does that happen? It actually seems to be a combination of two things. First, you have those stay at home orders from state lock-downs. What are people going to do when they’re spending all that time at home? One thing a lot of homeowners have been doing is improving their homes via a range of home improvement projects. The second factor here is the stimulus money. Many people got that $1,200, much more for complete families, and finally went out to purchase those hardwood floors or new sinks or whatever else they needed. So home improvement stores are actually doing quite well during this pandemic.
People spending this sort of money is the reason why some reports claim that Walmart’s business is up a whopping 70% since March, and they’re making money hand over fist. Large home improvement franchises aren’t doing that well, but they’re certainly profiting here during these times. Social media videos have been surfacing amidst the lock-down showing stores like Lowes so full that cars are parking blocks away to walk there because the store parking lot is full.
The irony here for the real estate market is that these houses are being fixed up, worth a lot more money, but they’re not being sold. For any number of reasons, including the fact that people love their homes more now, plus they may be scared to move, there are around 29% fewer houses on the market available today, according to Realtor.com. So this is where we’re getting the flux. One side of the market (home ownership) is looking better than ever, while the other side (the real estate market) is floundering a bit.
Though a lot of experts who are aware of what’s happening here suggest that this might actually be a good thing; or at least as “good” as it could be given the fact that we’re going through a virus pandemic right now. To be clear, there’s nothing much we can do about a virus in America that Americans had no hand in creating and are thus at its mercy. Locking down and social distancing is the best people can do. Though while many areas of American life will be devastated by this pandemic, the fact that many more homes are going to be in tip-top shape and worth a lot more is actually a great way to exit the crisis.
The New Housing Market Could Be Epic
A good way to look at this would be to start with the equity being accrued during the crisis. Say the average American’s family home is worth right around $200k. It has three bedrooms, two bathrooms, a garage, and is at least a decade old. Now, put new floors in it, an updated bathroom and kitchen, and new paint, and that home’s value increases by at least 25%, maybe even more given that market demand after the crisis could be at an all-time high.
This is not only a huge financial boon for people selling their homes, or trying to draw more equity, but it’s also a huge prop for the mortgage and lending industry. They will be able to rake in a lot more profits by having average home prices increase. And the demand will be so high, while the supply will be in better shape than ever, that many more Americans are going to end up taking out large mortgage loans, which is going to prop up a lot of different industries.
The real estate market doesn’t exist in a vacuum, though it’s being forced to do so right now. Once the crisis has passed, the buying and selling end of the market is going to catch up with the newly updated homes, and we might just be able to crawl out of this recession a lot sooner than predicted.
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