The Federal Reserve might still cut interest rates again in January. But mortgage rates barely budged after the Dec. 10 move by the central bank to trim its benchmark rate by a quarter-point. “It’s a reminder that mortgage rates don’t follow Fed cuts directly, and they respond to broader expectations around inflation, employment and long-term economic strength,” says Samir Dedhia, CEO of One Real Mortgage. As of Dec. 17, the average 30-year mortgage rate was 6.30%, according to Bankrate’s weekly lender ...

Financial Data and Key Metrics Changes - Third quarter sales reached $20.8 billion, with comparable sales increasing by 0.4% year over year, despite a 100 basis point headwind from hurricanes [5][32] - Adjusted diluted earnings per share were $3.06, reflecting a 6% increase compared to the previous year [5][31] - Adjusted operating margin expanded by approximately 10 basis points, resulting in an adjusted operating margin rate of 12.4% [5][33] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in 10 of 14 merchandise divisions, with notable strength in appliances, flooring, paint, and kitchens and bath [17][32] - Online sales grew by 11.4% during the quarter, driven by increased traffic and strong conversion rates [7] - Home services experienced double-digit comparable sales growth, indicating strong performance in this key initiative [27] Market Data and Key Metrics Changes - Monthly comparable sales were up 2.5% in August, 0.9% in September, and down 2.6% in October, reflecting storm-related demand impacts [32] - Inventory at the end of Q3 was $17.2 billion, down approximately $400 million year over year, aided by inventory productivity initiatives [33] Company Strategy and Development Direction - The company is focused on its 2025 Total Home Strategy, which includes enhancing pro offerings, accelerating online sales, and leveraging loyalty programs [6][8] - The acquisition of Foundation Building Materials (FBM) aims to expand product offerings and enhance fulfillment capabilities, particularly in urban markets [12][13] - Investments in AI capabilities are expected to improve customer engagement and operational efficiency [10][11] Management's Comments on Operating Environment and Future Outlook - The management expressed confidence in the long-term health of the home improvement sector, despite current consumer anxiety and economic uncertainty [15][16] - The potential for lower interest rates and strong homeowner equity could spur demand for home improvement projects [15][66] - The company anticipates flat comparable sales for the year, with expectations of approximately $86 billion in total sales, including FBM [37] Other Important Information - The company has been recognized for its AI adoption, achieving a milestone award from OpenAI [11] - The company is committed to supporting veterans through community initiatives, including the Freedom Hill project [29] Q&A Session Summary Question: Thoughts on business trends and performance outlook for 2026 - Management noted positive comp performance to start the quarter and improvements in top-line performance since exiting October, indicating that key elements of the Total Home Strategy are working [41][42] Question: Changes in kitchen and bath performance - Management believes Lowe's is gaining market share in the kitchen and bath space due to improved technology and a better go-to-market strategy [48][49] Question: Improving pro survey sentiment and its implications - Management reported that 75% of pros feel confident in their job prospects, with ongoing investments in loyalty programs and fulfillment driving growth [55][57] Question: Macro environment and housing market outlook - Management acknowledged elevated mortgage rates but highlighted strong homeowner equity as a potential driver for future discretionary spending [65][66] Question: Strategy for medium to larger pro customers - Management emphasized the importance of the Milo's Pro Rewards loyalty platform and the integration of FBM to enhance service offerings for pro customers [70][71]

Financial Data and Key Metrics Changes - Third quarter sales reached $20.8 billion, with comparable sales increasing by 0.4% year over year, despite a 100 basis point headwind from Hurricanes Helene and Milton [4][29] - Adjusted diluted earnings per share were $3.06, reflecting a 6% increase compared to the previous year [4][28] - Gross margin improved to 34.2%, up 50 basis points from the prior year [30] - Adjusted operating margin rate was 12.4%, an increase of 10 basis points year over year [30] - Inventory at the end of Q3 was $17.2 billion, down approximately $400 million compared to the previous year [30] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in 10 of 14 merchandise divisions, with notable strength in appliances, flooring, paint, and kitchens and bath [15][29] - Online sales grew by 11.4% during the quarter, driven by increased traffic and strong conversion rates [5] - Home services experienced double-digit comparable sales growth, indicating strong performance in this key initiative [24] Market Data and Key Metrics Changes - The U.S. homeowner market remains healthy, with strong balance sheets and continued consumer spending, although affordability and economic uncertainty weigh on consumer confidence [12][13] - The average homeowner has record levels of equity, approximately $400,000, which may lead to increased investment in home improvement projects [13] Company Strategy and Development Direction - The company is focused on its 2025 Total Home Strategy, which includes enhancing pro offerings, accelerating online sales, and leveraging loyalty programs [5][6] - The acquisition of Foundation Building Materials (FBM) aims to expand product offerings and enhance fulfillment capabilities, particularly in urban markets [11][12] - Investments in AI are expected to improve customer engagement and operational efficiency, with virtual assistants significantly increasing conversion rates [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the long-term health of the home improvement sector, despite current macroeconomic uncertainties [14] - The company anticipates that lower interest rates could stimulate demand for home improvement projects, particularly through home equity loans [13][64] - The outlook for 2026 remains cautious, with expectations for flat comparable sales for the year [33] Other Important Information - The company is on track to achieve its multi-year goal of reducing in-store SKU count by 15% by the end of 2025 [21] - The marketplace initiative is showing early promise, exceeding expectations in seller onboarding and customer adoption [72][73] Q&A Session Summary Question: How is the business trend looking in light of recent performance? - Management noted positive comp performance to start the quarter, with improvements in top-line performance since exiting October [37][39] Question: What is the outlook for kitchen and bath categories? - Management believes Lowe's is gaining market share in kitchen and bath, supported by improved technology and product offerings [45][46] Question: Can you elaborate on the improving sentiment among pros? - The small to medium pro business remains stable, with 75% of pros feeling confident in their job prospects [52] Question: How does the company view the current housing market? - Management acknowledged elevated mortgage rates but highlighted the strong equity position of homeowners as a potential driver for future home improvement spending [62][64] Question: What are the early margin scenarios for FBM and ADG? - Initial estimates suggest a 50 basis point impact on margins in 2026, with a focus on gross margin improvements [56]

Core Viewpoint - The Trump administration is proposing a 50-year fixed-rate mortgage to enhance homeownership accessibility for Americans facing high housing costs and affordability issues [1][3]. Group 1: Mortgage Proposal - The proposed 50-year mortgage aims to lower monthly payments by extending the amortization period, with estimates showing a monthly payment of $2,572 for a 50-year mortgage on a $400,000 home at a 6.575% interest rate [6]. - The initiative is compared to the 30-year mortgage policies from the New Deal era, highlighting its potential impact on homeownership [2]. Group 2: Current Housing Market Challenges - The average U.S. household currently spends about 39% of its monthly income on mortgage repayments, significantly above long-term affordability benchmarks [3]. - The "lock-in effect" has led to a stagnation in the housing market, as many homeowners are reluctant to sell due to low interest rates secured prior to 2022 [4]. - The average age of first-time homebuyers has risen to 40 years, indicating a growing challenge for younger Americans to enter the housing market [8]. Group 3: Market Reactions and Alternatives - Adjustable-rate mortgages have gained popularity, now accounting for over 10% of mortgage applications, the highest level since 2021 [5]. - Critics of the 50-year mortgage warn that it may increase total interest paid and slow equity buildup, potentially trapping borrowers in long-term debt [7]. Group 4: Fannie Mae and Freddie Mac Developments - The proposal coincides with discussions about Fannie Mae and Freddie Mac potentially taking equity stakes in private-sector companies, similar to a previous deal with Intel [10][11]. - The administration emphasizes a focus on ensuring homeownership opportunities for young people as part of a broader strategy to address economic challenges [5].

Core Insights - Pending sales of existing US homes stalled in September, indicating buyer anxiety due to job market concerns despite lower mortgage rates [1][3] - The National Association of Realtors (NAR) reported that the index of contract signings remained at 74.8, with a previous month increase of 4.2% [2] - NAR Chief Economist Lawrence Yun noted that a record-high stock market and increased housing wealth were insufficient to counteract a softening job market [3] Market Trends - Mortgage rates are trending towards three-year lows, which may enhance affordability, although a potential government shutdown could hinder home sales activity [3] - The "lock-in effect," where homeowners hesitate to sell due to low-rate mortgages, is diminishing, contributing to increased inventory [4] - A national measure of home prices rose by 1.5% in August year-over-year, marking the smallest annual gain since mid-2023 [4] Regional Performance - Contract signings for previously owned homes increased by 1.1% in the South, reaching the highest level since March, while pending sales rose in the Northeast but fell in the West and Midwest [5] - The new-home sales market showed significant momentum, surging in August to the highest level since 2022, driven by builders offering price cuts and sales incentives [5] Leading Indicators - Pending home sales are considered a leading indicator for previously owned homes, as contracts typically occur one to two months before sales [6]

Company Overview - Opendoor Technologies has experienced a significant stock price increase over the last three months, transitioning from a meme-stock rally to a potential turnaround story [1] - The company has appointed a new CEO, Kaz Nejatian, previously COO of Shopify, and two co-founders have returned to the board, with Keith Rabois as the new chair [1] Market Conditions - Investors are optimistic about potential Federal Reserve interest rate cuts, which are expected to lower mortgage rates, thus boosting the housing market [2] - The stock surged on August 22 following comments from Fed Chair Jerome Powell regarding possible rate cuts, with a 25 basis point cut anticipated [2] Business Model Impact - Opendoor's business model, which involves flipping homes for profit, stands to benefit from lower mortgage rates, potentially increasing market activity [3] - However, there are concerns that lower rates may not be sufficient to achieve the profitability investors are seeking [3] Housing Market Dynamics - Current mortgage rates are above 6%, significantly higher than during the pandemic, leading to a "lock-in effect" where homeowners are hesitant to sell [5] - Existing home sales have been stagnant, averaging around 4 million annually, which is approximately 30% lower than pre-pandemic levels [6] Future Opportunities - A substantial drop in mortgage rates could encourage more buyers and sellers to enter the market, increasing housing inventory and providing more opportunities for Opendoor [7] - An active housing market may reduce the time Opendoor holds homes, potentially lowering operational costs [8]