Home Depot Struggled as Home Sales Fell Last Fall
With home sales down last September, shoppers were skipping the new kitchen and coming in only when something broke.
Marketplace · Home improvement stores feel the pinchLast September, Rachel Drew was watching old, dying trees on her Massachusetts property that could hit her house or cars in a storm. She was delaying their removal because hiring workers and equipment cost so much at the time.
Drew, who works with Harvard's Joint Center for Housing Studies, said other homeowners were making the same calculation. They were holding off on projects that were not urgent, like renovating a kitchen and redoing the cabinetry and countertops.
That pullback was showing up at building material stores. Jamie Katz, an analyst with Morningstar, said that over the last handful of quarters, chains like Lowe's and Home Depot have really struggled to stimulate transaction growth, or get more shoppers through the door.
Zach Fritz, with Sage Policy Group, said hardware stores need more home sales to bring in shoppers.
Katherine M. Edwards described the pattern: sellers repaint, replace appliances, and make small cosmetic fixes. If owners were not moving, they lived with worn paint and dated kitchens, and bought no lumber, paint, or tools.
Existing home sales were down. Mortgage rates were still climbing as of September.
What was left was the work no one could delay. If a refrigerator failed, if a toilet broke, or if a water heater had an issue, it had to be fixed. For now, many of the projects people still pay for are emergency repairs.
Questions people ask
Why do higher mortgage rates keep people from moving?
Most homeowners have a lower rate on their current loan than they could get today. Selling and buying another house would mean trading that cheap loan for a more expensive one, so monthly payments would jump even for a similar house. Many decide to stay put instead.
Why would a seller spend on paint and appliances instead of leaving that to the buyer?
Fresh paint and working appliances make a house show better in photos and in person, and they help it pass a buyer's inspection. Buyers often prefer a home that looks maintained, so sellers make those fixes to attract offers. After the sale, buyers often make their own small updates.
Could a drop in mortgage rates quickly revive home improvement sales?
Lower rates would help, but usually with a lag. Cheaper loans first thaw home sales, then sellers start fixing up homes and buyers personalize the houses they purchase. Big discretionary remodels return last, after households feel confident about prices, jobs, and renovation costs.