Home improvement sales have been keeping point of sale devices in Home Depot and Lowes stores busy for the last several years. Reality shows that focus on knocking down walls to create the “open concept look,” and the shows that give homeowners the information they need to turn a garage into a man cave, give Americans the energy they need to create a do-it-themselves mentality.
The slow housing market played a role in home improvement success. The 2008 recession tore the housing market apart. Many areas of the country are still recuperating from that financial crisis. Low inventory in the real estate market forced many homeowners to remodel rather than buy a new home. The remodel bug spread around the country like a herd of fleas on a bloodhound. Home improvement retailers couldn’t keep enough bathroom fixtures and kitchen equipment in stock to satisfy busy homeowners.
But according to a report by Harvard University’s Joint Center for Housing Studies, the home improvement explosion will be just a drip in 2019. The report predicted people won’t spend as much to remodel their homes as they did in the past. But according to the report, they will still spend more than $350 billion on home repairs and improvements in the third quarter of 2019. The same report predicted first and second quarter home improvement spending would be a lot less than $350 billion. And the fourth quarter of 2019 won’t be much better.
Higher interest rates and a slow housing market will keep the home improvement business alive, but the political and economic uncertainty will impact the way Americans spend their disposable income. For those reasons and a few other reasons, Lowes and Home Depot profit projections might disappoint investors.
Wall Street is not waiting for the slowdown to happen. Home Depot and Lowes stock are not as attractive to investors as they were a couple of years ago. And when that happens, retailers experience a decline in traffic. Without store traffic retailers like Home Depot and Lowes can sink into the pit of unprofitability quickly. Sears is a good example of a retailer who lost track of customer needs and sank to the bottom of the retail food chain. Wall Street isn’t planning for a Home Depot or Lowes financial funeral, but investors are changing the way they look at home improvement companies next year and in the future.