Business & Finance
Business and Finance
Business and Finance
Mon, July 26, 2010
Fri, July 23, 2010 PPG, Sherwin Williams Weyerhaeuser, Masco and Berkshire Hathaway
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: PPG (NYSE: [ PPG ]), Sherwin Williams (NYSE: [ SHW ]), Weyerhaeuser (NYSE: [ WY ]), Masco (NYSE: [ MAS ]) and Berkshire Hathaway (NYSE: [ BRK.B ]).
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Here are highlights from Thursdaya™s Analyst Blog:
Existing Home Sales Fall 5.1%
The regional data suggests that the mix may well have contributed to the increase in the median price. Sales in the Northeast were up 7.9% for the month and up 17.1% year over year. The Northeast is the most expensive area of the country when it comes to housing, with a median price of $244,300, although that is down 1.2% from a year ago.
Partially offsetting that was the West, which is the second most expensive region with a median price of 221,000, up 1.5% from a year ago. Existing home sales plunged 9.3% out West from May, although they are still up 0.9% from a year ago.
Sales in the inexpensive regions of the country fell. Sales in the Midwest where the median price is $155,900 fell 7.5% for the month but are up 11.8% from a year ago. In the South, which is by far the largest region, the median price is $163,600, unchanged from a year ago. Dixie existing home sales fell 6.5% for the month but are 11.0% higher than a year ago.
Existing vs. New Home Sales
Existing home sales, however, only indirectly affect economic activity. When people move into anew for thema house they will tend to redecorate. That can help generate sales of paint, which helps companies like PPG (NYSE: [ PPG ]) and Sherwin Williams (NYSE: [ SHW ]).
That, however, pales in comparison to the amount of economic activity generated by building and selling a new home (labor, lumber, drywall, plumbing fixtures, etc.). That means more business for firms like Weyerhaeuser (NYSE: [ WY ]), Masco (NYSE: [ MAS ]) and several divisions of Berkshire Hathaway (NYSE: [ BRK.B ]).
New home construction provides relatively high paying jobs to those without high levels of formal education. Those are the people who are most in need of jobs. In June, the unemployment rate for high school dropouts was 14.1%, and was 10.8 for those with just a high school diploma. The unemployment rate for those with a Bachelor's Degree or higher was 4.4%.
The tax credit mostly served to shift sales that would have otherwise occurred by a few months. As such, they did very little to actually stimulate the economy. Extending the credit to move-up buyers made the program even less effective, since it results in no net reduction of the existing inventory. Even with first-time buyers it mostly served to move people from renting to owning, and resulted in a higher vacancy rate for apartments. Restricting the credit to new homes only would have resulted in FAR more bang for the buck.
Historically, it is residential investment -- aka the building of new homes -- that kick-starts the economy when it is in a recession. However, that would have resulted in building of new homes. Thata™s great for current economic activity, but not good when the country is already oversupplied with houses.
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