Home Improvement Expected to Pick Up Amid Lower Interest Rates

The home improvement business is reportedly expected to pick up, driven by lower interest rates and higher property values.

More homeowners are borrowing against the rising value of their properties and considering spending on home repairs and renovations as interest rates drop, the Wall Street Journal (WSJ) reported Tuesday (Oct. 22).

The home improvement business surged during the pandemic but slowed as borrowing costs rose, according to the report.

Consumer spending and home repair and renovation is expected to return to growth next summer, the report said, citing Harvard University’s Joint Center for Housing Studies.

The slump in the business has been relatively mild, but the decline from record highs has led to closings and curtailments of production at sawmills, a bankruptcy filing by hardware wholesaler True Value and drops in the prices of some stocks in the sector, per the report.

The pickup in home improvement spending is expected to be aided by lower interest rates prompting consumers to use home equity lines of credit to fund projects and by homeowners who took out historically low mortgages during the pandemic choosing to renovate their existing homes rather than moving to new ones, according to the report.

The timeline of the recovery is uncertain, though, as homeowners may wait to see how low the interest rates go, the report said.

Home Depot said in August that it is working to win over a greater share of the B2B segment — professional builders and contractors — because consumer spending on home improvement projects had dropped amid higher interest rates and concerns that the economy is getting worse.

The home improvement retailer said it expects demand to remain tight and it lowered its guidance for the rest of the fiscal year, saying it expects sales at stores open at least a year to fall between 3% and 4% this year compared to last year, down from its earlier estimate that sales would fall around 1%.

“The underlying long-term fundamentals supporting home improvement demand are strong,” Ted Decker, chair, president and CEO of Home Depot, said Aug. 13 during the company’s quarterly earnings call.

Lowe’s also revised its annual forecasts downward in August, saying a challenging macroeconomic environment was dampening consumer spending on home improvement projects.

The decline in Lowe’s consumer segment was partially offset by positive comparable sales in Pro and online.

“As we look ahead, we are confident that we are making the right long-term investments to take share when the market recovers,” Marvin R. Ellison, chairman, president and CEO of Lowe’s, said Aug. 20 during the company’s quarterly earnings call.