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Home Depot says people are less likely to spend money on home improvements because they are unhappy with the economy.
The big store for home improvements, which is a good indicator of customer spending and the housing market, lowered its sales goals for the year. Higher interest rates and worries that the economy is getting worse were making people spend less on home repair projects, the report said.
This is bad news for Home Depot because their business depends on people buying homes. High interest rates are making the market slow down.
In a news release, Ted Decker, CEO of Home Depot, said, “During the quarter, higher interest rates and greater macro-economic uncertainty weighed on consumer demand more broadly, leading to less spending on home improvement projects.”
Last quarter, Home Depot’s sales went up 0.6%, ending a five-quarter trend of down sales. On Tuesday, the company said it thinks sales at shops that have been open for at least a year will drop by 3% to 4% this year compared to last year. It had earlier been thought that sales would drop about 1% by that measure.
It’s been about a year since people wanted to make home improvements, and the company said that things haven’t changed much. Decker was still positive, though, saying, “The long-term fundamentals supporting home improvement demand are strong.”
The stock price of Home Depot (HD) dropped almost 5% before the market opened.
During the worst of the pandemic, when people were staying home more, they bought a lot of this product because they wanted to improve their homes. However, many people have stopped buying things and are now more interested in events like concerts and travel. Others have just cut back on spending in general. The change has been bad for Home Depot.
Prices for homes are through the roof across the country, and in most areas, demand still exceeds supply.
The latest numbers from the National Association of Realtors show that the typical price of a previously owned home in the US rose to $426,900 in June. This is 4.1% more than at the same time last year.
The highest mortgage rate ever recorded in 2024 was 7.22% in early May. However, rates have been slowly going down for the past few weeks. Recently, rates hit their highest level in 20 years.
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