America’s obsession with renovating homes is finally coming to an end.
The trend that took over during the pandemic-triggered lockdown is now fading away, thanks in part to volatile economic conditions. The shift has started to impact companies such as Home Depot, one of the largest retailers in the US, which reaped the benefits of the trend over the past few years.
Americans’ love for improving homes helped Home Depot’s revenue climb to a record $160 billion for the quarter ended on Jan. 31, 2023—up from $70 billion for the same period in 2008-2009.
But things are shaping up differently now. For the first time since 2009, Home Depot’s executives suspect a drop in its annual sales as they observed that people are spending less on renovations and power tools.
“We saw more pressure across the business compared to what we observed when we reported fourth-quarter results a few months ago,” Home Depot Chief Executive Ted Decker said on an analysts’ call. The chain has projected its sales to fall between 2% and 5% in fiscal 2023.
Why the home improvement craze faded in the U.S.
The dip in home renovations has been the result of the appreciation of home prices and refinancing mortgages, in addition to economic uncertainty, according to a January report by the Joint Center for Housing Studies of Harvard University.
The anticipation of a recession is also contributing, the organization said.
“Homeowners are likely to pull back on high-end discretionary projects and instead focus their spending on necessary replacements and smaller projects in the immediate future,” said Carlos Martín, project director of the Remodeling Futures Program at the Harvard’s Joint Center, in the report.
The official numbers back up the Harvard report’s predictions. The latest data published by the Federal Reserve Bank of New York this week indicated that Americans generally aren’t in position to spend on home improvement. The persistent rises in the prices of essentials such as food and rent have wreaked havoc on household budgets, forcing many Americans to use credit cards to pay for their survival. The total US household debt reached a record $17 trillion earlier this year.