Why Home Depot and Lowe’s Are The Only Retailers Doing Well Right Now
Home Depot and Lowe's are benefitting from an uncertain housing market as homeowners look more toward investing in staying in their homes versus selling them.
Home Depot and Lowe’s are doing well, according to CNBC’s Financial Advisor Summit. This is in despite of the crashing housing market. The despairing housing market is caused by the pandemic and mortgage rates and housing prices are increasing astronomically, making homeowners rethink selling their homes.
The uncertainty within the housing market is only compounded by a combination of factors. These have ranged from looming effects of food costs, gas prices, distribution issues, and housing availability. To raising interest rates and downsizing companies everywhere.
The primary factor affecting the housing market is the mortgage rates. It is currently around 35% higher than the median income of your average household to make your average monthly payment. You are also required to put about 20% down on those mortgages.
This is a severe problem due to the lack of housing control by the national housing strategy passed in 2019. Many houses that were built before this were aimed at luxury homes. This created a shortage of affordable housing for low-income families and even middle-class citizens. But for Home Depot and Lowe’s these circumstances play to their benefit.
As priorly mentioned, the transportation issues caused by both Covid-19 aftereffects on our industries, and also the war in Ukraine. These issues have caused supply chain shortages and labor costs. With the difficulty of obtaining materials to build houses, their costs have also increased. Overall, this has caused what took only a few months to six to twelve months to build a single home as of 2022.
All these compounding factors have caused these housing and mortgage rates to increase to such astronomical highs. This is not to mention an even more competitive housing market due to the lack of housing available, increasing the homeless and crime rates in many areas. The housing construction rate as of 2022 has decreased by 55% since 2008. While the number of homeless individuals has almost reached half a million.
Homeowners are finding reassurance in these turbulent times in their own homes that they own and know they have for sure. This has driven homeowners, according to Marine Sargsyan, Houzz staff economist, “Additionally, more than half of the homeowners surveyed have no intention of selling or moving out of their current residents in the next 20 years or ever.”
This creates a boon for our two home improvement stores. Homeowners are resolute in remaining in their homes for the foreseeable future to invest more into their homes. In another survey done by Houzz, out of 4000 homeowners. About 1% have canceled their projects, 37% have completed their improvement for this year, and nearly 25% are planning to start a new improvement project coming into 2023.
This is great news for Home Depot, and Lowe’s as their stock alone has risen about 3% just Wednesday alone. This is even though both their prices are increasing, this isn’t deterring people from making their homes even homier. This is also helping homeowners raise the value of their homes.
A Statement by Chief Financial Officer & Executive Vice President Richard McPhail, “There is inflation in the market and elasticity, but not to the degree that we anticipated, and the customer shows us they are resilient,”
This trend is likely to continue for some time for how long it is sustainable can be anyone’s guess. Americans are finding some solace in what they can do and making the most of it.