January 20, 2021
Even before the pandemic, housing prices throughout the country were on the rise. While prices saw a brief dip during the uncertainty of COVID-19’s early months, they soon recovered and continued the longest sustained upward housing price streak since 2005. Real estate values are expected to continue their rise in 2021 as remote work trends have more reconsidering their living arrangements. This trend benefits not only real estate companies and REITs but other related industries that get a boost when homeowners are buying and selling. Among them:
Rocket Companies (Tii:RKT)
The Fed reacted to the pandemic by cutting interest rates, which has led to a boom in the mortgage industry. Rocket is in an interesting position because the company services mortgages but does not hold the actual loans. All loans are sold to third parties, leaving Rocket to handle the day-to-day business of collecting the mortgage for them for a .25% fee. This approach substantially reduces Rocket’s risk. Unsurprisingly given the housing market, the company’s direct-to-consumer revenue increased by 120% year-over-year in 2020. According to Jay Farner, Rocket’s CEO, the company assisted more clients in the third quarter of 2020 than any quarter in its 35-year history.
RE/MAX Holdings Inc. (Tii:RMAX)
Real estate agents are a part of virtually every home sale, with for sale by owner transactions accounting for only 3% of these transactions. One of the largest real estate names is RE/MAX, with approximately 6,800 offices in 110 countries and territories. The franchise continues to grow, its total agent count increasing 5.9% in 2020 and the expectations of an additional 4.25%-5.25% for the full-year. Company agents represent both buyers and sellers, so RE/MAX benefits from either side of the transaction. RE/MAX has also added to its business by expanding into the mortgage brokerage business with Motto Mortgage franchises, which has grown to over 125 offices across more than 30 states.
Sherwin-Williams Company (Tii:SHW)
A coat of paint can do a lot to improve a home’s eye appeal. So, it is no surprise that companies in the home improvement sector are doing well alongside the current real estate boom. One of the biggest beneficiaries is Sherwin-Williams. For its most recent quarter, consolidated net sales increased 5.2% to $5.12 billion. Sherwin-Williams also raised its fiscal 2020 diluted net income guidance to $21.49-$21.79 per share from $20.96-$21.46. The company’s share price has also benefited, up more than 23% over the last 12 months. Strong demand in the architectural coatings industry in 2020’s third quarter are largely responsible for the increase.
Floor & Decor Holdings (Tii:FND)
Minor kitchen remodels are among the top home improvement projects that can increase a home’s value and attract potential buyers. Cosmetic changes like new flooring, new backsplashes and updated kitchen counters can be just what the room needs for new life. A multi-channel specialty retailer operating 128 warehouse-format stores and two design centers across 30 states, Floor & Decor works with homeowners and professional flooring contractors. Named one of Fortune’s 100 fastest-growing companies, the company reported 31.4% higher net sales and an 18.4% rise in comparable-store sales for its fiscal third quarter ended September 24, 2020.
Whether you are buying or selling, odds are there will be a company involved in moving your furniture and related items from one place to the next. While many opt for professional movers, far more – particularly younger people – opt for the DIY approach. According to AMERCO’s subsidiary U-Haul, three out of four people choose the do-it-yourself path when relocating. This has been good for U-Haul and its parent company, which reported that earnings reached $266.4 million in its most recent quarter, a 54% increase over the same period last year. Chairman Joe Shoen attributed the strong showing to the company’s self-move and self-storage businesses.
Savings levels remain high for many in the homebuying market in spite of high unemployment. For millions of Americans, vacations, commuting costs and related work expenses like dry cleaning, were all practically non-existent last year. When combined with cheap mortgages and remote working, real estate should continue its winning streak into the new year. And companies such as these will look to maximize the impact of the trend on their bottom lines.
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