It’s hard to commit to financing a new home or renovation project if you’re not sure you’ll have a job to pay for it.
Economic concerns like job losses and overall affordability continue to weigh on home improvement retailers, including Home Depot, which reported nearly flat comparable sales growth for both the quarter and full fiscal year on Tuesday.
“Continued consumer uncertainty: That’s still the number one reason why people are telling us, our customers are telling us that they’re not investing, certainly, in large projects,” CEO Ted Decker said on an earnings call.
“That has everything to do with consumer confidence and sentiment, jobs, picture, overall price levels and affordability in the economy,” he added.
Home renovation activity typically corresponds to housing sales, but the combination of high prices and low existing mortgage rates has largely kept homeowners locked in place.
At the same time, high borrowing costs for new loans and waves of layoffs have made homeowners less enthusiastic about financing a kitchen or bathroom upgrade.
And these are the households that are among the healthiest financially in the US economy, CFO Richard McPhail told CNBC.
“They do tell us that concerns over housing affordability and job losses are rising,” he said.
Looking ahead, although spring’s warmer weather and tax refunds typically mean a busier time of year for Home Depot, the company is approaching the season with caution.
“We’re actually not counting on a lot of support from tax stimulus,” Decker said. “We’re hearing that it’s just as likely that that’s either going to be used for debt pay-down for lower income deciles, or saved by higher income deciles. So we’re not planning on a lot.”
Home Depot and its rival Lowe’s, which reports earnings Wednesday, have both navigated the stretch of uncertainty with discipline, and both retailers’ stock prices were up Tuesday following Home Depot’s results.
“Hopefully we’re bouncing along the bottom of turnover,” Decker said of the housing market.
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