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The Housing Boom’s Impact on Stocks



An Update on the Housing Market

The pandemic has fueled a surge in demand for houses. People are seeking out more room to work, study, and socialize at home. Low interest rates are also pushing mortgage payments down, spurring more people to buy houses. The most recent data from the National Association of REALTORS® shows that home sales in September 2020 were over 20% higher than in September 2019. Additionally, there are fewer houses on the market than there have been since 1982, and houses are selling much faster than normal. On average, houses are only staying on the market for 21 days.

The combination of a spike in demand and limited supply is causing the price of houses to climb. Median home prices recently hit a record of $311,800, about $40,000 higher than prices a year ago. Demand for homes in suburban areas and vacation towns has been particularly high. These trends are boosting shares of companies that facilitate home sales, like Zillow Group (ZG). Companies specializing in home improvement are also seeing growth.

Zillow Earnings Exemplify Housing Excitement

Zillow reported its third quarter earnings after markets closed yesterday, which hit $39.6 million. This beat expectations and set a new record for the company, exemplifying the upward trend in the housing space.

The company’s mortgage arm as well as its Zillow Offers business was strong. Additionally, the company has seen gains because it has been able to meet unique demands of homebuyers during the pandemic. Its Zillow 3D Home technology allows people to take virtual tours of homes owned by Zillow. The company also enabled virtual consultations with brokers and agents to help home buyers and sellers feel safe during the pandemic.

Following the announcement, Zillow’s shares climbed over 2% in after-hours trading. So far in 2020, the company’s shares have risen by 126.1%.

Home Improvement Shares Spike

As people buy houses and spend more time at home, they are flocking to buy furniture and home improvement supplies. The markets are reflecting these trends. Discount home goods retailer Overstock (OSTK) has seen its shares climb by more than 740% year-to-date. Shares of Wayfair (W), another furniture company, have risen by almost 200% year-to-date. Home Depot (HD) and Lowe’s (LOW) are up 30% and 40% respectively. Shares of paint retailer Sherman Williams (SHW) and pool supplier Poolcorp (POOL) are also on the rise.

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