“The strong performance in the quarter was even more impressive as we were comparing historical growth last year and had a slower start to the spring this year,” Decker said.
During a conference call with analysts, Decker added that “clients keep telling us that their homes have never been more important, and the backlog of projects is very healthy.” “The medium to long-term underpinnings of the demand for home improvement have never been stronger,” he said.
Home Depot’s strong numbers may help dispel some concerns about an economic slowdown and a possible drop in home prices.
Yes, plans to raise the Fed’s interest rates could lead to higher mortgage rates. But experts point out that a short supply of new homes along with a still healthy job market should continue to support home sales. This is good for Home Depot.
High mortgage rates “will undoubtedly pour some cold water on the housing market,” Joe LaVorgna, chief US economist for Natixis CIB, said in a report.
But he added that “ascertaining the severity of the slowdown in home prices is extraordinarily difficult due to the chronic national housing deficit – exacerbated infinitely by the spreading housing pandemic, and ongoing supply chain issues that have prevented the completion of construction of new homes.”
LaVorgna believes that “just a single-digit correction in home prices over the next year is perfectly reasonable.”
In other words, home prices are not likely to collapse quite as much as they did in the late 2000s. This is not a repeat of the mortgage boom and subsequent crash.
“The main issue for housing remains a lack of supply. There isn’t enough to meet demand,” said Laura Adams, chief real estate analyst at Aceable, an online real estate education platform. “We don’t expect this to be another bubble bursting. There may be a gradual easing this year and next.”
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