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The Housing Woes Spread


This is the week the stock market seems be acknowledging that the housing slowdown is spilling over to other industries. On Monday aluminum giant Alcoa reported that it missed its second quarter earnings. On Tuesday Home Depot said its earnings could fall as much as 18% this year, twice what the company was projecting earlier in the year. Sears provided the double-whammy, saying its second quarter earnings could be as low as $200 million in the second quarter, down from $284 million in the same period last year. Fewer sales of appliances were cited as an issue. Bad news for Whirlpool.

Even the already crumbling homebuilding and mortgage industries got bad news. DR Horton, the industry’s largest builder, said future orders were down 40%. Rating agency Standard & Poors lowered its scores on a bunch of subprime mortgage securities. The Dow took a dive.

This has been building for months already. Railroads reporting lower shipments of plywood. Masco Industries, the nation’s largest cabinet maker, laying-off 16% of its staff. There were even reports that immigrant construction workers were wiring less money back home.

Home Depot’s chief financial officer acknowledged that the housing slump could continue well into 2008. It is also worth noting that both Home Depot and Sears took the occasion of their dour earnings forecasts to announce big stock buybacks. That means the companies think things will get worse. But ultimately, get better.


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