Bad news for homebuilders is good news for Home Depot and Lowe’s

As construction of new homes slows down, demand to renovate existing homes increases

Lowe's Home Improvement (Credit: Getty Images)
Lowe's Home Improvement (Credit: Getty Images)

Factors ranging from rising lumber prices to a shortage of skilled workers are slowing down the construction of new homes. While that may be bad news for the housing industry, it’s good news for home-improvement chains like Home Depot and Lowe’s.

As the production of new homes slows down and prices go up, homeowners start seeing their current residences more like investments, making them more inclined to take on renovations like a new bathroom or a backyard patio, according to Bloomberg.

There are currently 123 million occupied homes in the country — a far greater number than the roughly 1 million housing starts expected in 2018 — and the inventory is likely to only get tighter as millennials start settling down with children and families.  The amount of young adults living at home hit a high of 32 percent in 2016 but has since started to decline.

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The country’s housing stock is also getting older, with 51 percent of residences more than 40 years old in 2016, according to John Burns Real Estate Consulting. This leads to more home repairs as well. Lowe’s and Home Depot currently have about $170 billion in combined annual sales.

“What matters is the occupied housing base,” Home Depot CFO Carol Tome told Bloomberg. “That’s a lot of households for us to sell to.” [Bloomberg]  – Eddie Small