Impact of Foreclosure Properties on Lowe’s and Home Depot

The sales performances of home improvement retailers Lowe’s and Home Depot CEOs are closely tied with various stages of foreclosure and the number of foreclosure properties, according to the chief executives of the country’s two largest home improvement retailers.

Robert Niblock, CEO of Lowe’s, explained that Lowe’s sales decline when large numbers of homes are about to be foreclosed. He said that during this stage, homeowners stop doing repairs or improvements because they reason out they are about to lose them anyway.

Niblock also added that it is also common during the foreclosure process for homeowners to take out fixtures they have installed or just simply neglect their houses.

It is when the houses have become foreclosure properties that sales of home improvement products increase, according to both Niblock and Frank Blake, CEO of Home Depot.

Blake explained that when lenders and other sellers prepare the foreclosure properties for sale, they buy paints, lighting and other fixtures to improve the homes before they are listed and sold.

Niblock explained further that when foreclosure properties are finally sold, sales of home improvement products follow sales levels related to any other kind of change in home ownership.

Both Niblock and Blake explained that foreclosures affect their companies’ sales negatively, but foreclosure houses improve their companies’ sales when these are readied for sale and when these are finally bought and further improved by the buyers.

Blake however said that there are more properties going into foreclosures than coming out.

Based on data from the Mortgage Bankers Association, the pace of mortgage delinquency is increasing.

The MBA reported that the share of mortgage borrowers in default by at least one month, including borrowers already in the foreclosure process, is 12.07, the highest level in MBA’s 37-year history.

The association said that even mortgage borrowers who have good credit scores are now being weighed down by unemployment and the recession. Subprime lending is no longer the cause of the new batch of foreclosure properties; prime loans now account for the biggest percentage of new foreclosures, according to MBA.

The four foreclosure-battered states of California, Florida, Nevada and Arizona continue to account for the highest shares of delinquencies. Lowe’s and Home Depot have large numbers of store outlets in these states.

Additionally, the National Association of Realtors reported that about 45 percent of all sales of pre-owned homes in April were foreclosure properties and houses sold in short sales.

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