Sales dropped at Home Depot—the world’s largest home improvement retailer—for the first time after three straight years of growth, according to its Q2 earnings report released on Tuesday (Aug. 15).
Although the company beat earnings expectations, all eyes were on its slipping sales, which fell 2% as customer transactions faltered. Home Depot announced that 2023 sales could plunge as much as 5% compared to 2022.
The dip comes at a time when Americans feel cynical about owning property. According to Fannie Mae’s July national housing survey, only 18% of the country thinks it’s a good time to buy a home, citing high prices and unforgiving interest rates.
This sentiment, combined with a post-pandemic pullback from inflated home remodeling driven by remote work, signals bad times ahead for the home improvement business. Home Depot seems to agree: The board of directors recently announced a $15 million share repurchase program aimed at keeping its stock price high. Shares were up 0.75% at 3 p.m. in New York, after rising as much as 1% on the earnings report.
Buffett bucks the trend
So, if the home ownership forecast is grim, why did Berkshire Hathaway (BH)—billionaire Warren Buffett’s sprawling business conglomerate—just announce three previously undisclosed investments worth over $800 million in remodeling and home building?
BH now owns 5.97 million DR Horton shares (worth $726.4 million), 153,000 Lennar shares ($17.2 million), and 11,112 NVR shares ($70.6 million). This major move comes despite Q2 losses for its other home building companies, like Benjamin Moore and Clayton Homes, announced in an earnings report earlier this month.
Buffett’s investment strategy suggests that he’s either bullish on a rebound in Americans’ housing optimism—unlikely, according to Quartz’s Nate DiCamillo—or confident that interest rates will fall soon, leading to a resurgence in home sales.
Also, if the economy improves but housing inventory stays low, Buffett is probably banking on a renewed interest in home construction, due to the lack of supply.
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