American homeowners invested heavily in renovating and expanding their dwellings over the past three years. Here's a closer look at the US home improvement boom, and why Home Depot warned this week it might be over.The COVID-19 pandemic spurred authorities to restrict travel and shutter non-essential venues like restaurants, stadiums, and casinos.
The demand spike helped Home Depot grow its sales by $47 billion between 2019 and 2022 — a 13% compound annual growth rate — and its earnings by 60% during that period.The pandemic threat has now receded, freeing homeowners to revert their spending from goods to travel, live entertainment, and other services.
The value of people's stocks, homes, and other assets have declined in recent months too. Rate hikes and recession fears have fueled an exodus from riskier assets to cash, bonds, and other havens. "There's heightened inflation and rising interest rates, a tight labor market, and moderating equity and housing markets," CEO Edward Decker said on the company's fourth-quarter earnings call, according to a transcript provided by Sentieo/AlphaSense."So given all that, we do expect moderation in home-improvement demand."
Decker also flagged greater price sensitivity among consumers, primarily for big-ticket, discretionary items like patios, grills, and appliances.