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Episode: A tale of 3 Q3s

Author: Marketplace
Duration: 00:28:02

Episode Shownotes

Financial data from three industry-leading firms tells three very different stories. Concert promoter Live Nation had a scorching-hot summer season, while car rental company Hertz fumbled an electric vehicle investment. Home Depot fell somewhere in between. Also in this episode, housing construction. Are townhouses a solution to the shortage of

homes? And why does HUD take years to fund rebuilding after natural disasters?

Summary

In this episode of Marketplace, host Kai Ryssdal analyzes the divergent third-quarter financial performances of three major firms. Home Depot reports cautious consumer behavior despite higher-than-expected sales, while Hertz faces significant challenges, including a revenue decline and losses on electric vehicle investments. Conversely, Live Nation excels with record profits from live music events as consumers prioritize experiences. The episode also discusses the lengthy processes of disaster recovery funding, highlighting the struggles faced by communities like Houston. Additionally, it examines the complexities and increased demand for townhome construction amid evolving family dynamics and housing needs.

Go to PodExtra AI's episode page (A tale of 3 Q3s) to play and view complete AI-processed content: summary, mindmap, topics, takeaways, transcript, keywords and highlights.

Full Transcript

00:00:01 Speaker_05
We've got some corporate earnings today, a little housing, and stick around for the longest job title I've ever heard from American Public Media. This is Marketplace. In Baltimore, I'm Amy Scott, in for Kai Riesdahl. It's Tuesday, November 12th.

00:00:26 Speaker_05
Good to have you with us. For those of us who've been distracted by other news, may I remind you that we are at the tail end of corporate earnings season, and those profit reports and forecasts can tell us a lot about the underlying economy.

00:00:41 Speaker_05
Among the bellwethers reporting today was Home Depot. The home improvement chain said its third quarter sales came in higher than expected, but that customers are feeling cautious. Marketplace's Kristen Schwab takes a closer look.

00:00:56 Speaker_09
John Talbott isn't really a seasonal decor guy himself.

00:01:00 Speaker_04
but I am married and my wife enjoys decorating for Halloween.

00:01:05 Speaker_09
She's more of the gourds and pumpkins type, not so much the 12-foot outdoor skeleton type, an actual Home Depot product that kind of went viral this year.

00:01:14 Speaker_09
Talbot, a retail marketing professor at Indiana University, says seasonal decor was a hit for the company.

00:01:21 Speaker_04
I think consumers will spend on things that make them feel happy

00:01:27 Speaker_09
Happiness does have a price limit, though. Big ticket transactions at Home Depot, ones over $1,000, those were down nearly 7% compared to the same quarter last year. Consumers are still on the sideline. Jamie Katz is an equity analyst at Morningstar.

00:01:43 Speaker_09
She says people are still uncertain about inflation and uncertain about when mortgage rates might fall. And that has kept the housing market in limbo for now. Which, of course, impacts Home Depot's revenue from what it calls DIYers, a.k.a.

00:01:59 Speaker_09
regular people, and professional contractors.

00:02:02 Speaker_01
People are just saying, you know, we want to do this project, but let's wait and see if rates pull back a little bit before we tackle it.

00:02:09 Speaker_09
Drew Redding, a home building analyst at Bloomberg Intelligence, says big projects are on the back burner.

00:02:15 Speaker_01
kitchen remodels, bathroom models and the products associated with them. And one of the primary reasons for that is because those are projects that tend to be financed.

00:02:24 Speaker_09
But Redding says pent-up demand for those projects is building. Home Depot just needs the housing market to pick up.

00:02:31 Speaker_01
We know that movers tend to spend more than non-movers.

00:02:34 Speaker_09
A study from the National Association of Home Builders shows that, on average, buyers of existing single-family homes spend more than people who stay put — over $5,000 more in the first year. I'm Kristen Schwab for Marketplace.

00:02:49 Speaker_05
Elsewhere in earnings news, Hertz, the rental car company, posted disappointing results. Revenue was down almost 4% from the same time last year. And the company had to write down the value of its fleet by a billion dollars.

00:03:04 Speaker_05
That's largely because of a big bet the company made on Teslas a few years ago. Marketplace's Sabree Benashour has more on why that didn't go so well.

00:03:13 Speaker_19
Jessica Lipsky is a media professional who travels a lot for work, rents a lot of cars, and every time she has a choice, rent an electric vehicle or gas.

00:03:23 Speaker_11
I choose gas.

00:03:25 Speaker_19
She wants to want to choose electric, but she doesn't.

00:03:29 Speaker_11
I wouldn't really know the process of like how to charge an electric vehicle, where I should go, how much is that going to cost?

00:03:38 Speaker_19
People will do this research if they are going to buy an electric car, but renting, the technical term for all of that, is a hassle.

00:03:47 Speaker_11
It definitely feels like a logistics challenge when I have other things to worry about.

00:03:53 Speaker_19
This was one of the big challenges Hertz ran into when it decided to buy an estimated 35,000 Teslas to rent out a few years ago. So it has been offloading thousands of them since. Eugene Belostatsky is with Citigroup.

00:04:07 Speaker_16
As of now, Teslas are about 3% of the total fleet. It was closer to 10% at the peak.

00:04:16 Speaker_19
And as it offloaded these cars, Hertz collided with another problem, says Alan Baum, head of market research firm Baum & Associates.

00:04:23 Speaker_20
Tesla reduced the sales price of their retail cars, which obviously reduced the value of those vehicles for Hertz and put them in a very bad position.

00:04:35 Speaker_19
But according to Citigroup analysis, the hemorrhage has stabilized and Hertz is at a more sustainable level of electric vehicles. And for all of Hertz's problems renting EVs, people are still interested in buying them.

00:04:46 Speaker_19
David Green is an auto industry analyst with Cars.com.

00:04:49 Speaker_01
We're seeing strong demand growth, particularly in used EVs.

00:04:54 Speaker_19
And some of those used EVs might just have been previously owned by Hertz. In New York, I'm Sabri Beneshour for Marketplace.

00:05:01 Speaker_05
Wall Street hit a speed bump today. We'll have the details when we do the numbers.

00:05:33 Speaker_05
Continuing our corporate profits tour, Live Nation, the big concert promoter and parent company of Ticketmaster, told investors yesterday it had its biggest summer concert season ever, with profits up 39 percent year over year for the third quarter and 144 million tickets sold through October.

00:05:54 Speaker_05
All this as ticket prices, at least for the big acts, get more and more expensive. Marketplace's Matt Levin explains why music fans are still willing to splurge.

00:06:04 Speaker_02
Madonna, Coldplay and Bad Bunny were some of the biggest concert draws in 2024. It cost an average of $209 a ticket to see the Material Girl on her Celebration Tour.

00:06:16 Speaker_02
University of Miami music industry professor Sarona Elton says coming out of the pandemic, live music is just a bigger part of our lives and our budgets.

00:06:26 Speaker_10
We've come out of the revenge spending era, except that we now have an even more deep understanding of how important those experiences are to us. And we are now in a different mindset about prioritizing our spending.

00:06:42 Speaker_02
Post-pandemic, concerts aren't just a place to go see live music from your favorite artists. They're also increasingly one of the few places you can hang out with people who share your interests.

00:06:52 Speaker_02
You know, outside of Reddit thread, Winnie Katzenstein is a consumer strategy specialist at Deloitte Consulting.

00:06:59 Speaker_13
Especially in a world where there's a lot more divisiveness, the chance to be able to go to a Taylor Swift concert and be with other Swifties who, you know, have a fairly like minded mentality about the way they approach the world is a big deal.

00:07:12 Speaker_02
Although there may be some downsides to concerts increasingly serving a social purpose, music critic Stephen Hyden has noticed an evolving norm at the 20 or so shows he's been to this year. Groups of friends talking through the concert.

00:07:27 Speaker_15
There's always like a pretty big section of the audience that doesn't seem to care about the music on stage. If you ever do ask them to stop talking, there's like an indignation that comes into play.

00:07:41 Speaker_02
Like, how dare you? I paid 200 bucks for these seats. I can talk as much as I want. I'm Matt Levin for Marketplace.

00:08:15 Speaker_05
Recovery from a storm, wildfire, or other natural disaster is expensive, as many folks in the southeast are learning after back-to-back hurricanes. In the immediate disaster response, FEMA funding can help cover urgent repairs,

00:08:30 Speaker_05
And HUD, the Department of Housing and Urban Development, provides longer-term funds for rebuilding.

00:08:36 Speaker_05
States including Florida, Louisiana, and Texas have received billions of dollars over the years to reconstruct destroyed homes and build new housing after devastating storms. But it takes a long time.

00:08:48 Speaker_05
In Houston, Marketplace's Elizabeth Troval has this story.

00:08:52 Speaker_07
Just north of downtown Houston, Luisa Chavez gives me a tour of one of four brand new houses on the block after a ribbon-cutting ceremony.

00:09:01 Speaker_12
We have the three bedrooms upstairs.

00:09:04 Speaker_07
She's a project manager for nonprofit developer Avenue. We're in a great two-story.

00:09:09 Speaker_12
The left side, we have kind of like a mudroom and a half bath.

00:09:14 Speaker_07
Unlike most of the new homes popping up in this gentrifying, historically Latino neighborhood, these will rent at affordable rates. The new construction catches the eye of 61-year-old John Cortez, who happened to be passing by.

00:09:30 Speaker_07
His budget is around $700 a month. Game on.

00:09:32 Speaker_14
Final move out. I'm looking for a place quick.

00:09:38 Speaker_07
Cortez may have stumbled into a new home, one that was seven years in the making, built with federal dollars in response to one of the costliest storms in U.S. history, Harvey.

00:09:51 Speaker_07
FEMA helped with initial repairs, but the big rebuilding dollars came from HUD. The city of Houston ended up spending around $660 million of HUD's disaster funding, says Derek Sellers with the city's Department of Housing and Community Development.

00:10:07 Speaker_00
We had a multifamily program, a down payment assistance program and a program for affected homeowners. So rehabilitation, reconstruction.

00:10:17 Speaker_07
That infusion of funds has led to major multifamily developments opening more than 3,000 designated affordable units once construction is done.

00:10:27 Speaker_06
If you get a billion dollars into your jurisdiction for affordable housing, you really can rebuild people's homes in a more resilient way. You can put more affordable rentals on the ground.

00:10:35 Speaker_07
Sarah Labowitz is with the Carnegie Endowment for International Peace. She says the problem with this money is the timing. Places more recently hit by disasters are still waiting on their money, like Hawaii after their wildfires.

00:10:50 Speaker_06
Because Congress has not appropriated any money for affordable housing recovery for any jurisdiction since May of 2023.

00:10:59 Speaker_07
And Congress has to jump through extra hoops for that HUD money for post-disaster housing needs compared to FEMA dollars.

00:11:06 Speaker_06
There is no bucket at HUD that is a permanent program for disaster recovery that recognizes the need for affordable housing and resilience after disasters that Congress can refill.

00:11:17 Speaker_07
While FEMA money is flowing to places battered by recent natural disasters like North Carolina, HUD money isn't. And it'll take time and politicking, says consultant Mike Sprayberry, who used to oversee disaster recovery for the state.

00:11:34 Speaker_17
Our congressmen and women are up there lobbying for a big chunk of change.

00:11:41 Speaker_07
Sprayberry supports permanent authorization of this bucket of funding, though bills designed to do that haven't passed in recent years.

00:11:49 Speaker_17
That would go a long way for a smoother and more successful program implementation.

00:11:56 Speaker_07
Chrishell Pillay also supports permanent authorization. She's with Organizing Resilience, which helps communities respond to disasters. She's also living disaster response firsthand.

00:12:08 Speaker_18
There are exposed studs and rafters.

00:12:13 Speaker_07
We're inside her Houston home that was damaged by the Houston windstorm in May. The recovery is happening relatively fast. She's insured.

00:12:22 Speaker_07
But many residents across the city wait years dealing with government delays and red tape, like one family she knows, hit by Harvey.

00:12:31 Speaker_18
They went through the process, the application process and all, and they were scheduled to go and sign the final contract to get work underway. The husband dies.

00:12:43 Speaker_07
But the home was in the husband's name, not the wife's. So now the house can't be rebuilt. Because of delays getting out funding for that family, help never came. In Houston, I'm Elizabeth Troval for Marketplace.

00:13:27 Speaker_08
Coming up... I don't see myself working a 9-to-5 anytime in the near future. Fair enough. But first, let's do the numbers.

00:13:37 Speaker_05
The Dow Jones Industrial Average shed 382 points, 9 tenths percent, a close of 43,910. The Nasdaq gave back 17 points, less than a tenth percent, to end at 19,281. The S&P 500 lost 17 points, 3 tenths percent, to finish at 5983.

00:13:57 Speaker_05
Sabree Benesher was telling us about the troubles at the rental car company Hertz. Well, Hertz's stock was up eight and six tenths percent. Rival Avis budget grew two and four tenths percent.

00:14:07 Speaker_05
Enterprise Holdings, the country's largest rental car operator and owner of the Alamo and National brands, gave back two and a quarter percent. E-commerce firm Shopify soared 21% after posting better-than-expected third-quarter earnings and revenue.

00:14:23 Speaker_05
Bond prices fell. The yield on the 10-year T-note rose to 4.42%. You're listening to Marketplace. This is Marketplace. I'm Amy Scott. Most of the homes in this country are detached single-family houses, more than 60 percent according to U.S. Census data.

00:14:56 Speaker_05
And as I'm sure I don't have to tell many of you, higher home prices and persistently high mortgage rates these days have put owning one of those houses out of reach for a lot of people. But what if we built differently?

00:15:09 Speaker_05
Heather Long wrote about that in a recent column for The Washington Post. She's also a regular on our weekly wrap. Nice to have you back on, Heather. Thanks, Amy. Let's start with your headline. The new American dream should be a townhouse.

00:15:23 Speaker_05
Why townhouses?

00:15:25 Speaker_03
It was a bit provocative of a headline, but the basic idea is people are in desperate need of affordable housing. And one of your obvious option, if you're from other countries, would be why don't you look for a condo or a high-rise building?

00:15:44 Speaker_03
And the reality is the United States has built almost no condos since 2009. But what we are building are townhomes or what's known as medium density housing. So everything from duplexes to townhomes to cottage courts.

00:15:59 Speaker_03
I didn't even know what a cottage court was until I started researching all of this. But a lot of young people like them because they're low maintenance lifestyle. You don't have to spend every weekend raking the leaves and doing the yard.

00:16:11 Speaker_03
Usually there's some sort of homeowners association that does that for you. And it's a better use of space.

00:16:18 Speaker_03
You can fit more of these types of houses near a public transit hub or near a lot of grocery stores and amenities, but it's just a lot more affordable.

00:16:29 Speaker_05
And how much more affordable can this be?

00:16:32 Speaker_03
It's pretty substantial. Obviously, it varies a lot, like everything across the United States, but we had Zillow run the numbers.

00:16:39 Speaker_03
And in a major metro area, like let's take Los Angeles or Miami, it can be $200,000 less in the sale price versus a single family home. And the other thing that people forget is it's less to maintain

00:16:55 Speaker_03
something like a townhome or a row home, because you are splitting those costs. You share that one or two walls with the neighbor. Usually the insurance costs are a big one. Those are usually lower on a townhome than a standalone home.

00:17:11 Speaker_03
Taxes are often lower because you're on a smaller lot size. So a lot of that quickly adds up for people, and that's why I think it used to be seen as just a starter home.

00:17:21 Speaker_03
And as I called around the country, builders kept telling me, I'm constantly amazed at the large age range of people and types of people who are interested in townhomes today that would not have been 25 years ago.

00:17:37 Speaker_05
Given the appeal you just described, it might surprise people to learn that townhouses are actually illegal in many communities. Why is that?

00:17:46 Speaker_03
They're hard to do. I know everybody keeps talking about zoning, zoning, zoning. There's some funny building codes that make it really difficult in some communities.

00:17:55 Speaker_03
Often townhomes are usually two stories high, but in some places it might be three stories high. And some building codes and zoning codes start to consider three stories in a very different light.

00:18:07 Speaker_03
It has to have a lot of different requirements that are built in that make it cost prohibitive.

00:18:13 Speaker_03
I will say on the positive side, some communities have become embracing of townhomes, not just because they're more affordable, but a lot of communities don't wanna zone single family traditional homes right next to say a grocery store or a Walmart

00:18:30 Speaker_03
or some sort of shopping center, but they will allow townhomes as like a transitional from the shopping center. Then you can have the medium density and then you can have your more traditional single family.

00:18:44 Speaker_05
So I'm wondering how much of this is about people's preferences versus what builders are offering. I mean, is there enough demand for townhouses to drive more construction?

00:18:54 Speaker_03
There is now. And the encouraging news, there's actually been, I would call it a mini boom in townhome construction in the last two or three years.

00:19:03 Speaker_03
What's interesting is we've been talking a lot in the United States about the shifting of family size and preferences. this is playing into what people want too.

00:19:12 Speaker_03
We have more and more families that are going childless, more and more who are only having one child. And so you don't need a home with five or six bedrooms. You don't need the big McMansion anymore.

00:19:25 Speaker_03
I will say, and we got a lot of blowback on this on the piece, it's not for everyone. And the number one issue is stairs. Townhomes, row homes, even something like a duplex do have stairs.

00:19:39 Speaker_03
And obviously, people who want to age in place, that can be a challenge. And mobility, anyone with a mobility issue just cannot do the number of stairs. But the reality is we only have 10% of our entire housing

00:19:54 Speaker_03
stock in this country, that's high rise apartment or condos that would be really well suited to some of that aging in place and mobility issues.

00:20:03 Speaker_03
And so I see this growth of townhomes as helping to free up more of that limited supply of housing that works well for the mobility challenge if we can get other folks buying an affordable townhome.

00:20:19 Speaker_05
All right. The new American dream. Maybe it's a townhouse. Maybe it's a mix of housing. Heather Long is a writer at the Washington Post and a regular on our Friday Weekly Wrap. Thank you so much, Heather. Great to talk to you. Thanks, Amy.

00:20:33 Speaker_05
Keep an open mind on the townhouse. About 9 million people work multiple jobs in this economy for a lot of reasons. Not being able to find a full-time job or needing extra hours to deal with the financial situation. Some folks need the flexibility.

00:21:13 Speaker_05
And if you heard the show open, here's your payoff from the latest installment of our series, My Economy.

00:21:20 Speaker_08
My name is Ileana Marianas. My pronouns are they, them.

00:21:23 Speaker_08
I live in Atlanta, Georgia, and I am an actor, and a standardized patient, and an audiobook narrator, and an artistic associate with a French-speaking theater company, and a holiday caroler, and a ghost tour guide, and a teacher of viewpoints, and a burlesque performer.

00:21:45 Speaker_08
I started acting when I was in kindergarten. I got a lead in the holiday pageant and I was hooked after that. I always knew that this was what I wanted to do. And it took getting two back-to-back contracts with a theater company here in Atlanta.

00:22:02 Speaker_08
to give me the confidence to strike out on my own. And once I got those two back-to-back acting contracts, I realized I needed more jobs to supplement my income, and that's how I wound up with 12 jobs.

00:22:20 Speaker_08
see myself working a nine to five anytime in the near future. I am neurodivergent. I have ADHD. So actually having this many jobs is incredible for that because I never get bored in anything. And if I do get bored, chances are good it's a seasonal job.

00:22:38 Speaker_08
And once the season's over, that job will go away and I'll be able to replace it with a more fulfilling, more stimulating job. So during the pandemic, I realized that I needed a different living situation.

00:22:53 Speaker_08
So my parents had moved up to their lake house pretty much full time. And my original idea was that I would buy a tiny house, park it on the property, and run their house as a rental property for them.

00:23:06 Speaker_08
And I knew that there was absolutely no way that I could afford this giant house. So we got a little creative with the mortgage situation, and also I have turned it into a sort of artist commune. So there are now five of us living in the house.

00:23:23 Speaker_08
We're all actors, full-time. A really hard thing for me to learn was that I need to be really honest about what I'm capable of doing and that I need to ask for help from my artistic collaborators when I need it.

00:23:41 Speaker_08
And also that I need to take jobs that bring me joy because I've got something that fills me up artistically, something that is creative and that brings out the best in me as a person and as an artist.

00:23:58 Speaker_05
Ileana Marianas, actor, among other job titles, in Atlanta, Georgia. You know, we can't do this series without you. So please tell us what's happening in your economy at marketplace.org slash my economy.

00:24:32 Speaker_05
This final note on the way out today from Axios, Wall Street bonuses are expected to rise for the first time in three years. That's according to the consulting firm Johnson Associates.

00:24:43 Speaker_05
Investment bankers working in debt underwriting could fare the best with 25 to 35 percent increases. Those in equity sales and trading are looking at 20 to 25 percent bumps.

00:24:55 Speaker_05
In real estate and retail and commercial banking, though, bonuses could be flat or even down. thanks in part to high interest rates.

00:25:05 Speaker_05
Our Digital and On Demand team includes Keri Barber, Jordan Manji, Dylan Miettenen, Janet Nguyen, Olga Oxman, Ellen Rolfes, Virginia K. Smith, and Tony Wagner. Francesca Levi is the Executive Director of Digital and On Demand. I'm Amy Scott.

00:25:21 Speaker_05
We'll see you tomorrow. This is APN.