May 20th 2026|3 min read
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Home Depot is no ordinary retailer, but a barometer for America’s housing market. Sales by the world’s biggest chain of DIY shops fell sharply in 2007, before many on Wall Street cottoned on to the coming housing crash. More recently its revenues surged in tandem with the boom that followed the covid-19 pandemic.
Now Home Depot is again feeling the strain. Though home prices have held up, the home-buying frenzy has ground to a halt. Annual transactions fell by 18% in 2022 and by 19% in 2023. Mortgage rates have fallen from their peak in 2023, but sales of existing homes over the past two years have been the lowest in three decades, according to the National Association of Realtors. Speaking in April, Richard McPhail, Home Depot’s finance chief, put it plainly: “We have never seen housing activity this slow for this long.”
All this means fewer DIY projects. Favourable currency exchange rates boosted revenue growth in Home Depot’s latest fiscal quarter, for which it released results on May 19th. But strip these out and annual sales in America have been falling or flat for four years. Customer transactions last year were 9% below a peak in 2021.
Chart: The Economist
Worse, there is little sign of improvement. Home Depot expects comparable sales to be unchanged in 2026, with a best-case scenario of 2% growth. Its share price has plunged by nearly a third from a peak last year. Shoppers still snap up smaller items like gardening tools and paint. But they are not starting large projects such as kitchen and bathroom renovations—because the housing market is gridlocked.
Dearer mortgages are partly to blame. Homeowners with pandemic-era fixed rates of 3% or below are reluctant to sell and abandon them, now that the average rate on a new 30-year mortgage has risen to nearly 6.5%. Such rates also put first-time buyers off. More than half of outstanding mortgages still had rates of 4% or less in the third quarter of 2025.
The more expensive mortgages are, the less buyers can afford to pay for a house. But “sellers are extremely reluctant to realise losses from their homes,” says Tarun Ramadorai of the London School of Economics. This has also frozen the housing market in Britain, where transactions remain subdued. In both places, homeowners’ loss-aversion has contributed to prices not moving much. Instead, their unwillingness to sell at a loss has caused sale volumes to collapse.
Before the Iran war, America’s housing market looked ripe for a recovery. Unemployment was low, existing homeowners were sitting on near-record equity stakes and affordability was improving, in part because of rising incomes. But the closure of the Strait of Hormuz has sent energy prices rocketing, threatening to drive up inflation and, in turn, mortgage rates. And so the housing market remains on ice.
What might prompt a thaw? Some homeowners have little option but to sell up: those undergoing divorces, for instance, or moving for work. Home Depot, however, cannot rely on this trickle of transactions. So it is instead courting builders, who tend to spend more than the DIY crowd and now account for half of its revenue. Over the past few years, the firm has spent over $30bn acquiring wholesale distributors that cater to professional contractors. But for now, plenty of its tills remain empty—and offer a warning that America’s housing market is broken. ■