Lowe’s Companies, Inc. (LOW), The Home Depot, Inc. (HD): Existing Home Sales Skyrocket in July

As the housing recovery continues to gain momentum, we’ve become accustomed to impressive monthly results. But the official estimate of existing-home sales in July was nonetheless surprising given the slight decline the previous month. According to the National Association of Realtors, total existing-home sales grew by 6.5% on a seasonally adjusted annual basis, coming in at 5.39 million. Compared to the same month last year, the figure was 17.2% higher.

For much of the past year, one of the biggest factors weighing on the market for previously owned homes has been an exceptionally tight inventory. As I discussed here, this is largely attributable to the large portion of mortgages that remain underwater. Various estimates put the figure at anywhere between 19.8% and 25.4% of current mortgagees.

The bad news is that we saw little movement in this regard last month. While total housing inventory did increase by 5.6% at the end of July, the pace of purchases picked up as well. And as a result, the supply of available homes for sale remained the same at 5.1 months.

The one offsetting factor in this regard is the trend in home prices, which improved last month by 13.7% over July of 2012. As a general rule, home prices increase when the housing supply is below six months and decrease when its higher than six months. As they continue in this direction, fewer mortgagees will be underwater, which should free up homeowners to list their properties without the fear of realizing a loss.

Adding to the optimism in the housing market today were the quarterly results from Lowe’s Companies, Inc. (NYSE:LOW). The nation’s second-largest home improvement retailer reported that its same-store sales were 9.6% higher than the comparable quarter last year. And its net earnings followed suit, coming in at $941 million relative to last year’s $747 million.

These results come on the heels of The Home Depot, Inc. (NYSE:HD)‘s announcement yesterday that sales at its stores open at least a year were an astounding 10.7% higher. According to its CEO Frank Blake, “The second quarter results exceeded our expectations as our business benefited from a rebound in our seasonal categories, continued strength in the core of the store and the recovering housing market in the U.S.”

The article Existing Home Sales Skyrocket in July originally appeared on Fool.com and is written by John Maxfield.

John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Home Depot and Lowe’s.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.