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Soft Housing Market Is Keeping a Lid on Home Improvement Spending

With home sales continuing to limp along, Home Depot and Lowe’s are reporting that do-it-yourselfers are cutting back on projects.

Photo of the exterior of a Lowe's store
Photo by Michael Form via Pexels

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Home may be where the heart is, but homeowners aren’t showing theirs much love lately, judging by the forlorn looks in the eyes of home-supply companies. 

In its quarterly earnings call on Tuesday, Lowe’s reported falling revenue as homeowners spend less on their homes — an outcome in line with results reported last week by rival Home Depot. Amid a still-stagnant housing market, the two companies’ fortunes reflect America’s continued aversion to big-ticket spending.

High Point, Lowe Point

The housing market remains entirely stuck in the mud. While home sales increased about 3% in January versus the prior month, the bump should be taken with a grain of salt. After the white-hot pandemic years, sales of existing homes in 2023 plummeted by nearly 20% to around 4 million, the lowest full-year level since 1995. New home sales increased slightly in January, too, but similarly remain far below the pandemic’s home-buying blitz. Nobody is looking forward to the (presumably) eventual interest-rate cuts more than your local real estate agent.

Nobody, that is, except for big-box home goods retailers like Home Depot and Lowe’s. Just as Americans aren’t buying new homes, they aren’t pouring money into upgrading their current homes either:

  • Lowe’s, which still beat analysts’ Q4 expectations, noted that the downturn in the housing sector has hurt its important DIY unit, as well as hitting sales of major appliances. The company said revenue fell 17.1% from a year earlier.
  • Home Depot similarly beat analyst expectations by a narrow margin, but sales were still off 3% from a year ago. The company also reported softness among big-ticket product categories, though it does plan to open 12 new store locations this year.

“When [interest and mortgage] rates come down, that’s going to spur housing turnover and you know what happens when you put the house on the market: You spruce up the paint. You may spruce up the yard. You’ll do different projects around the house to get ready for sale and then when you buy a home, you do the same thing,” Lowe’s CEO Marvin Ellison said in an interview with CNBC.

Confidence Check: It’s not just the housing and home-adjacent markets feeling the squeeze, either. For the first time in four months, the consumer confidence index slipped in February, according to the Conference Board’s most recent monthly survey released on Tuesday. Meanwhile, speaking at an industry conference hosted by UBS on Tuesday, Goldman Sachs CEO David Solomon warned investors that a recession is still possible in the next year. Call it hard truths about a soft landing.