1 00:00:02,200 --> 00:00:05,600 Speaker 1: Global business news twenty four hours a day. It's Bloomberg 2 00:00:05,640 --> 00:00:08,720 Speaker 1: dot Com, the Radio plus Mobile Act and on your radio. 3 00:00:08,960 --> 00:00:13,000 Speaker 1: This is a Bloomberg Business flag from Bloomberg World Headquarters. 4 00:00:13,039 --> 00:00:16,200 Speaker 1: I'm Charlie Pallett. Stocks for falling with bonds after comments 5 00:00:16,200 --> 00:00:20,480 Speaker 1: from Federal Reserve officials spurred speculation on higher borrowing consumate 6 00:00:20,920 --> 00:00:24,000 Speaker 1: uneven growth in the US economy. The SMP five D 7 00:00:24,040 --> 00:00:27,440 Speaker 1: index now down ten points to twenty one seventy nine, 8 00:00:27,440 --> 00:00:29,880 Speaker 1: a drop there of five tents of one percent. The 9 00:00:29,960 --> 00:00:32,600 Speaker 1: TAO is down seventy seven points, the drop of four 10 00:00:32,640 --> 00:00:35,920 Speaker 1: tents of one percent, and naz stack down twenty nine points, 11 00:00:35,960 --> 00:00:38,800 Speaker 1: the drop of six tenths of one percent. The tenure 12 00:00:38,840 --> 00:00:41,840 Speaker 1: down three thirty seconds, the yield one point five six percent, 13 00:00:41,960 --> 00:00:45,960 Speaker 1: Gold up seven to thirteen fifty one, a gain of 14 00:00:46,000 --> 00:00:49,040 Speaker 1: six tenths of one percent, and crude oil up seventy 15 00:00:49,040 --> 00:00:52,599 Speaker 1: one cents to let forty five on West Texas Intermedia 16 00:00:52,720 --> 00:00:55,840 Speaker 1: Crude a gain of one and a half percent. I'm 17 00:00:55,960 --> 00:00:59,880 Speaker 1: Charlie Pallett, and that's a Bloomberg Business flash. This is 18 00:01:00,040 --> 00:01:04,039 Speaker 1: taking stock with Pim Fox and Kathleen Hayes on Bloomberg 19 00:01:04,200 --> 00:01:10,640 Speaker 1: Radio Home Depot, new home construction both up very nicely. Today. 20 00:01:10,760 --> 00:01:14,920 Speaker 1: We have the housing starts numbers soaring suddenly in July, 21 00:01:15,560 --> 00:01:19,119 Speaker 1: and we have home Depot, the world's largest home improvement retailer, 22 00:01:19,160 --> 00:01:22,479 Speaker 1: posting second quarter profit that rose nine point three percent. 23 00:01:22,880 --> 00:01:24,960 Speaker 1: Who compact tie it all together for us. Well, he's 24 00:01:24,959 --> 00:01:28,440 Speaker 1: in studio today, Brad Hunter, chief economist at home ed 25 00:01:28,480 --> 00:01:32,200 Speaker 1: Advisor Bred. Welcome back. Well, thank you, Kathleen. Well, let's 26 00:01:32,200 --> 00:01:35,880 Speaker 1: start with home Depot, home improvement, all those trends, because 27 00:01:35,920 --> 00:01:38,000 Speaker 1: in your work at home advisor, with a home advisor 28 00:01:38,080 --> 00:01:40,679 Speaker 1: does helping people find these kinds of services and things online, 29 00:01:40,720 --> 00:01:43,320 Speaker 1: This is right up your alley. You have an interesting 30 00:01:43,319 --> 00:01:47,680 Speaker 1: statistic that you're seeing growth in large ticket items up 31 00:01:47,720 --> 00:01:52,040 Speaker 1: eight percent, eight percent in nine plus dollar items. Uh. 32 00:01:52,080 --> 00:01:55,920 Speaker 1: This is helping people in particular, really helping to drive 33 00:01:55,920 --> 00:01:59,560 Speaker 1: those earnings. Yeah. So what's happening is we're seeing some 34 00:01:59,680 --> 00:02:04,240 Speaker 1: differ maintenance projects and deferred home improvement projects finally get going. 35 00:02:04,320 --> 00:02:06,680 Speaker 1: And what's happened is people are finally at the point 36 00:02:06,680 --> 00:02:09,840 Speaker 1: where they're feeling okay about their income and they're feeling 37 00:02:09,840 --> 00:02:12,400 Speaker 1: great about the equity they have in their homes. You know, 38 00:02:13,080 --> 00:02:17,000 Speaker 1: home equity has doubled in the last four years and such. Yeah, 39 00:02:17,080 --> 00:02:19,400 Speaker 1: I mean it's you know, it's a multiplier, right when 40 00:02:19,480 --> 00:02:23,760 Speaker 1: you've got get an increase in home prices that we've had, Uh, 41 00:02:23,800 --> 00:02:26,120 Speaker 1: it just multiplies it when it gets to home equity. 42 00:02:26,240 --> 00:02:29,560 Speaker 1: So that means people feel wealthier, they feel more secure, 43 00:02:29,600 --> 00:02:32,320 Speaker 1: they feel well, and they can also get home equity 44 00:02:32,360 --> 00:02:34,680 Speaker 1: loans if they want to home equity lines of credit 45 00:02:34,760 --> 00:02:38,600 Speaker 1: or increasing. And so what's happening is they're taking on 46 00:02:38,720 --> 00:02:42,040 Speaker 1: larger projects, They're buying larger items from home depot and 47 00:02:42,080 --> 00:02:45,120 Speaker 1: so on, and they are also taking on more of 48 00:02:45,120 --> 00:02:49,520 Speaker 1: these whole room, whole kitchen, whole bathroom, garage remodels, that 49 00:02:49,600 --> 00:02:51,520 Speaker 1: kind of thing. I know that you spent a lot 50 00:02:51,560 --> 00:02:55,120 Speaker 1: of time reading remodeling magazines, So maybe you can enlighten 51 00:02:55,200 --> 00:02:58,000 Speaker 1: us just a little bit about the divergence between the 52 00:02:58,040 --> 00:03:02,560 Speaker 1: mainline retailers such as Mace, these Nordstrom calls and of 53 00:03:02,600 --> 00:03:05,799 Speaker 1: course homep depoone will get lows results tomorrow because back 54 00:03:05,800 --> 00:03:08,520 Speaker 1: in May, I'm reading your note, you said consumers are 55 00:03:08,520 --> 00:03:12,000 Speaker 1: becoming more cautious. But that's got positive implications for the 56 00:03:12,040 --> 00:03:16,000 Speaker 1: home improvement sector. Tell us why nesting is investing. That's 57 00:03:16,000 --> 00:03:18,520 Speaker 1: the term I used in that article. And what I 58 00:03:18,560 --> 00:03:21,880 Speaker 1: mean by that is that people are viewing investing in 59 00:03:21,880 --> 00:03:25,320 Speaker 1: their home as sort of a defensive investment strategy. You know, 60 00:03:25,320 --> 00:03:28,079 Speaker 1: they're sort of saying, if I fortify the castle, I 61 00:03:28,160 --> 00:03:30,400 Speaker 1: know I'm gonna get some money back out of whatever 62 00:03:30,440 --> 00:03:34,480 Speaker 1: I put into the home improvement project. Um, and certain 63 00:03:34,520 --> 00:03:37,480 Speaker 1: projects will pay you back a greater dividend than others. 64 00:03:37,480 --> 00:03:39,600 Speaker 1: Some of them pay you back more dollars than you 65 00:03:39,600 --> 00:03:42,560 Speaker 1: actually put in. You're talking about blown insulation. I think 66 00:03:42,920 --> 00:03:45,880 Speaker 1: that actually talking about Remodeling magazine. They have the cost 67 00:03:46,000 --> 00:03:48,560 Speaker 1: versus value report they do once a year, and they 68 00:03:48,600 --> 00:03:53,800 Speaker 1: found that that was, um the highest payoff thing that 69 00:03:53,880 --> 00:03:55,400 Speaker 1: can you can do to your house if you don't 70 00:03:55,480 --> 00:03:59,120 Speaker 1: have proper insulation. You add that you get the energy benefits, 71 00:03:59,160 --> 00:04:01,320 Speaker 1: and and that's recent ailable you can add to the 72 00:04:01,360 --> 00:04:04,160 Speaker 1: price of the house. You know. You've also found out 73 00:04:04,240 --> 00:04:06,240 Speaker 1: not too surprising that the most money is spent at 74 00:04:06,280 --> 00:04:09,680 Speaker 1: home just after someone moves in and just before they 75 00:04:09,760 --> 00:04:13,080 Speaker 1: move out. It seems all of this, uh, this trend 76 00:04:13,160 --> 00:04:15,400 Speaker 1: is being driven though so much by the fact that 77 00:04:15,440 --> 00:04:18,680 Speaker 1: mortgage rates are so low. So if you want to 78 00:04:18,680 --> 00:04:22,720 Speaker 1: sell your house lots more UH sellers who can do it. 79 00:04:23,160 --> 00:04:25,440 Speaker 1: If you want to spruce up your house, you can 80 00:04:25,560 --> 00:04:28,040 Speaker 1: refight at a much lower rate. Banks they make you 81 00:04:28,120 --> 00:04:30,640 Speaker 1: drum jump through a thousand hoops, but but they'll do 82 00:04:30,680 --> 00:04:32,560 Speaker 1: it right. This seems to be a very important part 83 00:04:32,600 --> 00:04:35,479 Speaker 1: of the trend to Yeah, it's a great leading indicator 84 00:04:35,640 --> 00:04:38,400 Speaker 1: to look at when you're looking at home improvement. I 85 00:04:38,400 --> 00:04:41,120 Speaker 1: call it churn, which is basically the turnover of homes. 86 00:04:41,600 --> 00:04:43,840 Speaker 1: Um you know, four or five oh the homes are 87 00:04:43,839 --> 00:04:46,039 Speaker 1: being turned over, which is about average. So we still 88 00:04:46,080 --> 00:04:49,240 Speaker 1: actually have some runway to go to to get above that, 89 00:04:49,360 --> 00:04:51,920 Speaker 1: which was where we would normally get to at this 90 00:04:51,960 --> 00:04:55,680 Speaker 1: stage in a recovery. But what's happening is, uh, you know, 91 00:04:56,000 --> 00:04:58,720 Speaker 1: whenever somebody is getting ready to sell their house, they 92 00:04:58,720 --> 00:05:00,760 Speaker 1: have to do some home improved work because they need 93 00:05:00,800 --> 00:05:02,920 Speaker 1: to get it ready to pass inspections. They have to 94 00:05:03,160 --> 00:05:05,320 Speaker 1: make it, you know, increase the curb appeal and all 95 00:05:05,360 --> 00:05:07,520 Speaker 1: of that. And then after the person buys the house, 96 00:05:07,640 --> 00:05:10,640 Speaker 1: they want to customize it and make it more personalized themselves. 97 00:05:10,920 --> 00:05:12,400 Speaker 1: So it's a double hit if you think that this 98 00:05:12,480 --> 00:05:17,040 Speaker 1: is also going to increase insurance companies profits because I mean, 99 00:05:17,040 --> 00:05:20,560 Speaker 1: if you're going to see more home turnover, that's typically 100 00:05:20,560 --> 00:05:23,359 Speaker 1: when you get sent that flyer in the mail that 101 00:05:23,440 --> 00:05:26,719 Speaker 1: says before you you know, re up with your existing ensure, 102 00:05:26,880 --> 00:05:28,680 Speaker 1: call us now and we'll get you know that kind 103 00:05:28,680 --> 00:05:30,760 Speaker 1: of sure that you know. There's a lot of kind 104 00:05:30,760 --> 00:05:33,400 Speaker 1: of spinoff effects, and that's one of them. Another one 105 00:05:33,480 --> 00:05:36,920 Speaker 1: is UH inspection services start to spike up. And we're 106 00:05:36,920 --> 00:05:39,520 Speaker 1: seeing that in our own numbers, and we track more 107 00:05:39,520 --> 00:05:43,400 Speaker 1: than ten million data points each year within Home Advisor. 108 00:05:43,480 --> 00:05:45,559 Speaker 1: That is the number of people who are actually coming 109 00:05:45,560 --> 00:05:48,520 Speaker 1: through our online network to find a professional of some 110 00:05:48,640 --> 00:05:52,440 Speaker 1: kind of and that includes movers, and it includes inspection services. 111 00:05:52,440 --> 00:05:54,200 Speaker 1: And these are the kinds of things that are spiking 112 00:05:54,279 --> 00:05:59,400 Speaker 1: up every time somebody moves. Housing starts UH up pretty 113 00:05:59,480 --> 00:06:02,760 Speaker 1: sharply last month, the one point two million units at 114 00:06:02,760 --> 00:06:05,520 Speaker 1: an annual rate. I'm looking at my Bloomberg to see 115 00:06:05,839 --> 00:06:08,440 Speaker 1: the last time we haven't been that. We haven't been 116 00:06:08,480 --> 00:06:10,920 Speaker 1: that high in a while. But but here's the way. 117 00:06:10,960 --> 00:06:13,440 Speaker 1: I don't see it as a particularly strong report. And 118 00:06:13,440 --> 00:06:16,080 Speaker 1: here's why. If you look at UH, look below the surface, 119 00:06:16,120 --> 00:06:18,960 Speaker 1: below the headline, you see that single family it was 120 00:06:18,960 --> 00:06:22,720 Speaker 1: actually completely flat, essentially up point five. I call that 121 00:06:22,800 --> 00:06:25,160 Speaker 1: flat given the you know, confidence in a rule that 122 00:06:25,200 --> 00:06:28,920 Speaker 1: you have. So all of the increase was multi family, 123 00:06:29,640 --> 00:06:33,359 Speaker 1: and I think that multifamily doesn't have much runway left. 124 00:06:33,440 --> 00:06:37,040 Speaker 1: I think multi family cannot continue to increase the way 125 00:06:37,080 --> 00:06:40,480 Speaker 1: it has. And I think that probably by some time 126 00:06:40,520 --> 00:06:43,760 Speaker 1: next year, we'll see the top in multi family and 127 00:06:43,800 --> 00:06:46,200 Speaker 1: starts will start to trend back downward after. Is that 128 00:06:46,240 --> 00:06:48,560 Speaker 1: because the inventory is there so much more capacity, There's 129 00:06:48,640 --> 00:06:50,719 Speaker 1: just a lot more places to rent now? Is that way? Well, 130 00:06:50,720 --> 00:06:54,800 Speaker 1: that's right. What's happened is uh, so much new construction 131 00:06:54,839 --> 00:06:57,080 Speaker 1: has happened, and there's a lot of buildings that are 132 00:06:57,080 --> 00:06:59,640 Speaker 1: still under construction. You know. These kinds of especially the 133 00:06:59,680 --> 00:07:03,080 Speaker 1: luxury high rise buildings, take three years to complete, so 134 00:07:03,520 --> 00:07:06,320 Speaker 1: by the time they actually get completed, you know, and 135 00:07:06,400 --> 00:07:08,520 Speaker 1: some of them will complete next year, and I think 136 00:07:08,520 --> 00:07:10,640 Speaker 1: that they're going to find maybe a little softness in 137 00:07:10,680 --> 00:07:13,120 Speaker 1: the rents compared to what they performed. I want to 138 00:07:13,160 --> 00:07:14,920 Speaker 1: thank you very much for coming in and spending time 139 00:07:14,960 --> 00:07:18,760 Speaker 1: with us as always, Brad Hunter, chief economist at Home Advisor, 140 00:07:19,240 --> 00:07:21,720 Speaker 1: telling us all about the home improvement sector and the 141 00:07:21,760 --> 00:07:25,360 Speaker 1: housing industry. Shares of Home Depot now down about six 142 00:07:25,440 --> 00:07:29,040 Speaker 1: tenths of a percent. The stock of Home depot Let's 143 00:07:29,080 --> 00:07:32,080 Speaker 1: up about three percent so far this year, and it 144 00:07:32,120 --> 00:07:35,680 Speaker 1: pays a two percent dividend. You're listening to taking stock. 145 00:07:35,720 --> 00:07:39,040 Speaker 1: I'm pim Fox my co host Kathleen Hayes. This is 146 00:07:39,080 --> 00:07:49,080 Speaker 1: Bloomberg coming up at the plans who exit Obamacare insurance 147 00:07:49,080 --> 00:07:52,120 Speaker 1: exchanges in eleven of fifteen states and why of three 148 00:07:52,160 --> 00:07:55,280 Speaker 1: hundred million dollars and expected losses tied to them this year? 149 00:07:55,320 --> 00:07:56,800 Speaker 1: What does it mean for the insurer? What does it 150 00:07:56,800 --> 00:07:58,960 Speaker 1: mean for the industry. That's coming up on Bloomberg Radio.