Appetite for home improvement projects will slow this year, but there are good reasons to expect the decline to be temporary, according to home improvement retailer Lowe's (low volume).
“When you combine these factors with trends such as the chronic shortage of homes, the formation of millennial families, baby boomers aging and the number of people who continue to work from home – you can see why we believe home improvement demand will increase over time, both for homeowners and benefits,” Lowe's CEO Marvin Ellison said Tuesday on the company's fiscal fourth-quarter earnings call.
Lowe's comparable sales fell 6.2% in the quarter ended Feb. 2, driven by continued pressure from customers to hold back spending on big-ticket items. Lowe's forecasts comparable sales for 2024 will decline 2% to 3%.
Sales of previously occupied homes are at an all-time low, mortgage rates remain at 7%, and home prices have not cooled, discouraging many from moving or selling.
Due to such factors, the company expects DIY demand to remain under pressure in the near term, Ellison said. The other part of the equation is the timing of the Federal Reserve's interest rate cuts, which could boost the housing market and, in turn, big-ticket purchases at Lowe's.
“While optimism of a soft landing has increased, there is still a lot of speculation about the timing of expected interest rate cuts as inflation eases,” Ellison said. “It is also unclear how quickly consumers will react to these changes and how quickly their spending habits will change.”
Some Wall Street analysts aren't holding their breath that demand for home improvements will rebound this year amid higher mortgage rates and a pullback in new construction projects.
“Not 2024, maybe the second half of 2024,” DA Davidson managing director Michael Baker told Yahoo Finance Live (video above). “But we don't want to get too far ahead of ourselves. We think same-store sales will definitely be down in the first half of the year and even more so in the second half of the year.”
