Home Renovation Stores Cashing In on Builder-Adverse Market Conditions

Stores like Lowe's and Home Depot are making hay as rising mortgage rates, lumber prices, and a disappearing skilled labor force constrain home builders. 

Such current market conditions are increasing demand for existing homes, and these homes' values. As a result, homeowners view their properties as an investment worthy of remodeling projects, Bloomberg reports. Retiring CEO of Lowe's Robert Niblock explains that elevated home values are the most significant marker of home-improvement store performance, “The home improvement industry is poised to grow its share of overall consumer spending,” Niblock said. “Housing is expected to remain a positive driver, as demand in excess of supply drives home price appreciation.”

Fewer new homes means people are staying put longer. The age of the U.S. housing stock is only getting older, which leads to more repairs and trips to Lowe’s and Home Depot, which have about $170 billion in combined annual sales. In 2016, 51 percent of residences were more than 40 years old, up from 40 percent in 2005, according to John Burns Real Estate Consulting. A lack of skilled workers continues to slow down the home-building industry. Toll Brothers Inc., the biggest producer of luxury homes, last month saw its stock fall the most in almost a decade, and an index of home builder stocks has plummeted this year, even as the broader market -- including Home Depot and Lowe’s -- has gained.

Read more