Lowe's Earnings Shed Light On Housing Trends As Sales Drop: Toll Brothers In The Crosshairs?

As housing data continues to roll in, Tuesday's Existing Home Sales figure offers a mixed picture of the U.S. market.

The existing home sales print, alongside factors including the earnings reports from homebuilder giants and home improvement bellwethers can offer investors a clear sight into what we can expect from Toll Brothers Inc's TOL earnings, which are set to be issued Tuesday after the closing bell.

Here's what investors need to know.

Existing Home Sales Data: Existing-home sales in July declined 2.2% from June to a seasonally adjusted annual rate of 4.07 million, according to data issued by the National Association of Realtors.

Year-over-year, it represents a 16.6% drop from 4.88 million in July 2022, and is at the slowest pace since 2010.

Among major U.S. regions, the West saw an uptick in sales, while the Northeast, Midwest, and South all saw declines. Year-on-year, each region marked lower sales.

NAR Chief Economist Lawrence Yun blamed the sales downturn on two factors: inventory availability and mortgage rates. Both, he said, are currently skewed against the favor of buyers.

Inventory by the end of July was at 1.11 million units, marking a 3.7% rise from June. However, the figure is down 14.6% from the same time last year, as unsold inventory remains at a 3.3-month supply.

July’s median existing-home price for all housing types hit $406,700 — 1.9% higher than July of last year. Price increases were seen in the Northeast, Midwest, and South, though remained stable in the West.

Yun noted that while homeowners are enjoying increased wealth from recent property value growth, renters face growing affordability issues, mainly due to climbing interest rates.

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Mortgage Rates: Freddie Mac’s latest data shows the 30-year fixed-rate mortgage averaged 7.09% as of last Thursday, up from 5.13% a year ago. Yun is optimistic, saying a pullback in rates could invigorate the market.

Lowe’s Companies Inc LOW CEO, Marvin Ellison, said in a Tuesday statement that the company’s "Total Home" strategy spurred growth in the second quarter, particularly in the Pro customer and online sectors. Ellison said the company remains optimistic on the mid-to-long term outlook for the home improvement industry.

Lowe’s Earnings: Lowe’s issued better than expected earnings and reiterated its full year guidance.

The company issued earnings of $4.56 per share, which came head of the $4.49 estimate, on revenues of $24.96 billion, which missed the $24.99 billion estimate. For full-year 2023, Lowe’s projects revenues in the range of $87 billion to $89 billion.

Toll Brothers Outlook: Anticipation builds for Toll Brothers, the fifth-largest homebuilder in the U.S., as the company is expected to issue earnings of $2.81 per share on revenues of $2.41 billion on Tuesday after market close.

If you're wondering whether Toll Brothers will beat, it’s worth noting that other homebuilding giants like DR Horton Inc DHI, Lennar Corp LEN, PulteGroup, Inc PHM, and NVR Inc NVR recently beat earnings expectations.

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