Housing market and interest rate headwinds

“We continue to see softer engagement in larger discretionary projects where customers typically use financing to fund the project such as kitchen and bath remodels.”

“But we saw engagement the last several quarters in smaller projects. What we saw this most recent quarter is further pressure in larger projects.”

“We see it overall being flat you know, maybe up slightly, Those expectations have come down over the last several months.”

“We are not assuming a change in the rate environment nor improvements in housing turnover. As a result, we would expect continued pressure on larger remodeling projects.”

“However, higher interest rate environment continues to pressure larger remodeling projects.”

“However, we continue to see softer engagement in larger discretionary projects for customers typically use financing to fund the project such as kitchen and bath remodels.”

“However, we continued to see softer engagement in larger discretionary projects, where customers typically used financing to fund the project, such as kitchen and bath remodels.”

“We cited last quarter that we're at now a net cumulative shortfall of about $50 billion of home improvement spend on housing.”

“However, the higher interest rate environment continues to pressure larger remodeling projects.”

“Certainly, some relief on mortgage rates in particular could help. I think referring to it as a bit of a frozen housing market with, you know, forty-plus year low turnover rates and even new starts are struggling a bit.”

“There's clearly an expectation that we start to get some cuts in the second half of this year.”

“However, we continue to see softer engagement in larger discretionary projects where customers typically use financing to fund renovation projects.”

“So on one hand, we're looking at something as much as a $50 billion cumulative under spend in normal repair and remodel activity in U.S. housing. On the other hand, we have less turnover and home price appreciation. So that tension is going to have to balance itself out as we work through the rest of this year and into next year.”

“If there's an indication of maybe some fatigue in taking on bigger projects, we have seen Pro backlogs and larger backlogs start to diminish a little bit.”

“Our results missed our expectations, primarily due to the lack of storms in the third quarter, which resulted in greater-than-expected pressure in certain categories.”

“As you heard from Ted, the underlying demand in the quarter was relatively similar to what we saw in the second quarter. However, our results were below our expectations, largely due to a lack of storms relative to historic norms, which most notably impacted areas of the business such as roofing, power generation and plywood to name a few.”

“However, we continue to see softer engagement in larger discretionary projects where customers typically use financing to fund renovation projects.”

“We did expect to start seeing some pickup in demand in the second half of the year. And this wasn't just the calendar dynamic of, oh, things will be better in the second half. We're expecting interest rates and mortgage rates to come down, which they did that would have been some assistance to housing.”

“The housing activity is truly at 40-year lows as a percentage of housing stock. I think we're at 2.9% turnover. And then home prices have started to adjust in even more markets over this past quarter.”

“we've clearly called out over time that the most statistically relevant would be home price appreciation and household formation and housing turnover. Those 3 right now are pressured for sure.”

“we're looking at something as much as a $50 billion cumulative underspend in normal repair and remodel activity in U.S. housing.”

“Think about appliances, think about power tools and some of those pieces. Those are individual items as we've kind of talked about that metric in the past versus more of the project-oriented pieces that customers are still challenged with based on all the things that we've talked about earlier.”

“But what we're seeing now is even less turnover, the housing activity is truly a 40-year lows as a percentage of housing stock. I think we're at 2.9% turnover.”

“As you heard from Ted, the underlying demand in the quarter was relatively similar to what we saw in the second quarter. However, our results were below our expectations, largely due to a lack of storms relative to historic norms which most notably impacted areas of the business such as roofing, power generation and plywood to name a few.”

“if you look over time, the highest correlation to home improvement activity is probably home prices and secondly, turnover.”

“we expect our comps in the second half to be slightly higher than our comps in the first half. This is a reflection of compares to 2025 storm activity and the absence thereof.”

“with turnover down and people still wanting to move, they're not spending as much in their home if they anticipate moving in the next year or 2. So there's maybe a bit more repair than replace.”

“the cumulative underspend in home improvement, which we use some third-party consulting folks who put that at $22 billion today that people have underspent in the aging home.”

“That's really the telltale for us of when we think the demand profile is going to change for the upside. And we still have not seen that.”

“we anticipate these pressures will persist as we have not yet seen a catalyst for an inflection in housing activity.”

“Housing turnover has remained at historical lows since 2023, which has significantly reduced demand for projects and other purchases associated with buying and selling a home.”

“there are a number of dynamics we are observing that are pressuring housing and home improvement demand. The current mortgage rate environment and significant increase in home prices since 2019 have impacted housing affordability.”

“However, larger discretionary projects remain under pressure.”

“In terms of housing specifically, we're seeing significant implications as a result of a lock-in effect. Simply put, people aren't moving nearly as often as they typically do because current mortgage rates are so much higher than their existing rates. And as a consequence, housing turnover is hovering near its lowest levels since the mid-1990s.”

“So, we believe that when the DIY market inflect at some point in the future, we're in a perfect position to take overall market share in home improvement because of the strength we're seeing in Pro and online.”

“Although we are unable to call the date for the recovery in home improvement, we are confident that we'll be in a strong position to take share when the market begins to inflect.”

“When you combine those factors with trends like a large number of millennial-forming households, baby boomers aging in place and people continuing to work from home, we remain optimistic about the medium- to long-term outlook of the home improvement industry.”

“That said, the three core drivers of our business remain strong: home prices continue to appreciate, which is sustaining historically high levels of home equity; disposal personal income is now growing faster than inflation; and the aging housing stock means people will need to make repairs and improvements in their homes.”

“When we look ahead to 2025, we're confident that the three market scenarios that we outlined at our December conference captured a range of potential outcomes we could see in the home improvement industry this year.”

“We also expect mortgage rates to remain elevated, continuing to put pressure on existing home sales and some of the larger projects that are linked to those occasions.”

“Based on these factors, we are forecasting the home improvement market to be roughly flat this year, with pro outpacing DIY driven by the repair and maintenance occasion.”

“On our bigger ticket, we were high single-digit negatives over the course of Q1, Q2. We're coming out of Q4 here roughly flat on tickets over $500. So a good sign that we're seeing in those categories, not projecting an inflection or a recovery certainly as we look at 2025, but we hope we're kind of bumping along the trough in the bottom here.”

“we see this more today as a weather story than any election impact or any other broader macro shock that could be happening.”

“We anticipate that some homeowners will begin to tap into record levels of equity in their homes to fund larger renovation projects.”

“Beyond these factors, structural trends such as millennial household formation, baby boomers aging in place, and the persistence of remote work reinforce our confidence in the medium to long-term strength of the home improvement industry.”

“Core demand drivers remain supportive. Real incomes are forecast to grow again in 2025. Home prices are near record highs, and we have the oldest housing stock in U.S. history.”

“This has led to a lock-in effect and the lowest pace of existing home sales in the US in nearly thirty years.”

“As I've stated before, the key drivers of our business are still supportive: home price appreciation, disposable personal income growing faster than inflation, and the oldest existing housing stock in US history.”

“At the same time, an estimated 18 million new homes are needed by 2033.”

“In fact, industry analysts estimate that there's roughly $50 billion of deferred project demand as many homeowners have delayed larger discretionary projects over the past few years.”

“The medium to long-term outlook for the home improvement industry remains positive driven by an aging housing stock, which is at a record high, substantial homeowner equity, and the pent-up demand from delayed projects.”