Home Depot posted gains in same store sales for the first time in two years last quarter, according to an earnings report Tuesday morning.
The retailer is often looked to as a bellwether for the home renovation and construction business, which, like the housing market, has been chilled by higher interest rates and inflation.
Home Depot’s upswing in sales exceeded expectations, but the outlook wasn’t all positive.
The renovation market has been on a rollercoaster since the pandemic, from stay-at-home spending sprees to high interest rate retrenchment. Home Depot’s sales grew by about 1% last quarter, which seems to show things are starting to normalize, said Greg Portell, a retail consultant with Kearney.
“I think it is important not to confuse normalization with all of a sudden an uptick. Normalization just allows consumers to have some certainty,” said Portell.
Nick Spector, the owner of Alair Homes in Houston, has noticed a change in his customers as the shock of inflation and higher interest rates has receded.
“We’re seeing a lot of people you know, interested in moving forward with projects that they’ve been thinking about for months or even years, in a lot of cases,” said Spector.
Generally, there’s an uptick in smaller scale renovations. Spector said many homeowners decided to stay put instead of looking for a new house. High prices and mortgage rates have slowed down home sales, which puts a dent in large scale remodels.
“When somebody moves into a new home, there’s typically something that they want to do, whether it’s, ‘We need to blow out these walls and do some major changes,’” said Spector.
A slow housing market will likely keep growth in home renovations low, said Michael Baker, managing director at D.A. Davidson.
“I don’t think we’re out of the woods yet, as relates to the housing market, but it doesn’t seem to be getting worse, and in fact, bouncing along the bottom and maybe getting a little bit better,” said Baker.
He said even if the Federal Reserve doesn’t cut interest rates as quickly as once hoped, rates are unlikely to go up anytime soon.
Though, the new administration has introduced some uncertainties, said Kearney’s Greg Portell.
“The challenge for consumers is going to be, how do you interpret the headlines on things like tariffs, on things like trade, on things like immigration?” said Portell.
If costs for construction labor and raw materials are unpredictable, normalization gets a whole lot harder.
Read more at Marketplace
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