But now, stores like Home Depot and Lowe’s are experiencing the side effects of the national recession, and executives are blaming housing costs, mortgage rates, and credit card debt for the downward spiral.

Because the majority of Americans previously spent the majority of their days away from home, at work or running errands, this time inside changed things for them. They had more time, more money, and were noticing things around the house that they hadn’t seen before

Both stores offered home delivery on absolutely all of their products, meaning Americans didn’t even have to break protocol to spend money on DIY items.

Lowe’s, while much smaller than Home Depot, also did exceptionally well that year. In 2019, the company made $4.3 billion, whereas in 2020, it reported $5.8 billion in net earnings.

While Home Depot technically has everything that Lowe’s has, Lowe’s doesn’t offer everything Home Depot does. Home Depot has expanded its business to offer professional contractors the products they need, as well as providing the goods that DIY customers need, as Lowe’s does.

In order to offer construction companies the products they needed, Home Depot needed to build or buy large warehouses with space enough for industrial-sized quantities of lumber, insulation, roofing shingles, etc., which was very expensive.

However, Home Depot claims that with this acquisition, the company is now worth approximately $1 trillion, which is $50 billion more than it was worth before.

Specifically, their sales increase and decrease depending on the current average cost of a home, nationwide mortgage rates, consumer spending, and credit card debt.

This price jump has directly affected sales at Home Depot and Lowe’s, as Americans are now far less likely to spend any real money on home improvement projects. New homeowners simply don’t have the cash to refurbish within the first few years of moving in.

The current average mortgage rate is an almost unbelievable 7.08%, compared to just 3.38% in 2020. So many homeowners have been forced to simply live with their homes as they are to ensure they have the money they need to pay their mortgage every month.

In February 2024, MarketWatch released a study that showed 40% of Americans were struggling to pay their usual bills. That means that almost half of the American population has been forced to cut back on any spending that might be considered superfluous, which would certainly include unnecessary home improvement projects.

That’s 8.2% higher than it was at this time last year, and while Americans are grappling to save money and pay off their debts, the economy is certainly feeling the effects.

Sales at Home Depot only totaled $152.7 billion as opposed to $157.4 billion for this quarter last year. And while that may not seem like a significant decrease, it’s certainly enough to affect the company’s stock price.

Both of these giant corporations saw a significant drop in their stock prices since reporting their Q2 sales. While executives from each one report that they are prepared for lower sales and understand the macro trends causing this deflation, there’s no doubt that investors are concerned.

Decker said he’s not concerned about the numbers, as “It was just six months ago that interest rates hit their peak in October of 2020 mortgage rates… as we’ve seen the rates tick up and the impact of rates ticking up, that’s impacting that demand.”

McPhail said in a recent earnings call, “Well, interest rates are going – they’re coming down soon. Our customers tell us, hey, with that in mind, with that on the horizon, we’re just going to wait and so that’s really the most important dynamic from an income perspective.”

He explained, “When rates come down, that’s going to spur housing turnover and you know what happens when you put the house on the market: You spruce up the paint. You may spruce up the yard. You’ll do different projects around the house to get ready for sale and then when you buy a home, you do the same thing.”

Ellison explained, “As we look at 2024, we expect DIY demand to remain under pressure in the near term. But we feel great about the medium- to long-term outlook for our business and candidly for the home improvement industry in general.”

While Home Depot has decided to invest billions of dollars into distribution centers for professional sales, Lowe’s is taking quite literally the opposite approach. It’s focusing on improving sales within its DIY customer base.

Ellison reported that the new MyLowe’s Reward Card will allow consumers to personalize their account to receive relevant discounts, offer both in-person and online sale prices, and ensure that its customers come back for all their DIY needs.

Financial experts say that both Home Depot and Lowe’s are “no-brainer buys” for any investor, big or small, and that now would be a great time to get your hands on as many shares as possible while the stock prices are low.

As the experts explained, as soon as the American housing market levels out, mortgage rates decrease, and Americans feel comfortable spending money again, sales at both companies are likely to skyrocket. As soon as they possibly can, Americans will once again focus their spending on improving their homes, and Lowe’s and Home Depot will be there to help.

Many are worried that before the market returns to “normal,” it will suffer an incredible crash, but others argue that there won’t be a crash like there was in 2008.

So, hopefully, that means the American economy, its citizens, and of course the home improvement industry will be back on track by this time next year.