Home Depot’s strong quarter shows the housing market is still booming

The home improvement retail giant reported better-than-expected sales and profit gains for the first quarter on Tuesday and also raised its outlook for the rest of this fiscal year. Shares of Home deposit (HD) rose more than 2% in early trading on the news.
Home Depot, which is one of 30 Dow Jones stocks, also helped lift the market overall. Shares were broadly higher on Tuesday despite the retailer’s low earnings walmart (WMT), another component of Dow. Walmart fell about 7%. Home Depot Rival Lowe’s (LOW)which will report its first quarter results on Wednesday, rose nearly 3%
The Home Depot had a rough start to the year as investors worried about a potential housing pullback as interest rates and inflation rise. Stocks are still down more than 25% in 2022 despite Tuesday’s rally.

“The strong performance in the quarter is even more impressive as we were comparing against last year’s historic growth and faced a slower start to spring this year,” Decker added.

The strong Home Depot number may help dispel some concerns about an economic slowdown and potential decline in house prices.

Yes, the Federal Reserve’s rate hike plans could lead to even higher mortgage rates. But experts point out that the tight supply of new homes coupled with a still healthy job market should continue to fuel home sales. It’s good for Home Depot.

Rising mortgage rates will “undoubtedly pour cold water on the housing market,” Joe LaVorgna, chief economist for America as Natixis CIB, said in a report.

But he added that “it is exceptionally difficult to determine the extent of the slowdown in house prices due to a chronic national housing deficit – immeasurably compounded by the pandemic housing boom and ongoing supply chain problems. which prevented the completion of new houses”.

LaVorgna thinks that “just a mid-single-digit correction in house prices over the next year is entirely reasonable.”

In other words, house prices are unlikely to completely collapse like they did in the late 2000s. This is not a repeat of the subprime mortgage boom and the subsequent collapse.

“The main problem for housing remains the shortage of supply. There is not enough to meet the demand,” said Laura Adams, senior real estate analyst for Aceable, an online real estate education platform. “We don’t expect it to be another bubble bursting. There could just be a gradual cooling this year and next year.”

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