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CNN
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According to Home Depot, consumers are disappointed with the economy and are spending less money on major home renovation projects.

The home improvement giant, a proxy for consumer spending and the housing market, cut its revenue expectations for the year, saying customers would spend less money on home improvement projects due to higher interest rates and concerns that the economy could worsen.

Home Depot’s business is closely tied to the real estate market, and high interest rates are holding back the housing market and consumers’ ability to finance larger projects.

“During the quarter, higher interest rates and greater macroeconomic uncertainty put pressure on consumer demand overall, resulting in lower spending on home improvement projects,” Home Depot CEO Ted Decker said in a press release.

Home Depot’s sales at stores open at least a year fell 3.6 percent last quarter, the company said Tuesday. It expects sales at stores open at least 12 months to fall 3 percent to 4 percent this year from last year, less than its previous estimate that sales by that measure would fall about 1 percent.

Consumer demand for home improvement products has been declining for about a year, and the company said that hasn’t changed much. Still, Decker remained optimistic, saying, “The underlying long-term fundamentals supporting demand for home improvement products are strong.”

Home Depot (HD) shares fell less than 1% on Tuesday.

The company’s sales boomed during the height of the pandemic, when millions of people spent more time at home and turned to renovations and other home improvement projects. But many consumers have since shifted from buying physical goods to experiences like travel and concerts; others have simply cut back on spending generally. That shift has hurt Home Depot. McDonald’s, Starbucks, Disney and other consumer goods brands have also seen a decline in consumer traffic.

Home Depot officials said in a conference call that while consumer numbers were healthy, they were tackling fewer large projects, leading to sluggish sales of building materials, lumber and construction equipment.

Real estate prices are astronomically high across the country, and in most markets, demand for housing still exceeds supply.

The median price of a used home in the U.S. rose to $426,900 in June, up 4.1 percent from a year earlier, according to the latest data from the National Association of Realtors.

However, mortgage rates have been falling steadily in recent weeks since reaching their 2024 high of 7.22% in early May. Rates are below their two-decade high reached late last year.

Home Depot made its largest acquisition to date this year, buying SRS Distribution, a giant construction supplies company whose primary customers include professional roofers, landscapers and pool builders, for $18.3 billion.

Currently, the company gets about half of its revenue from construction professionals, who spend more money at home improvement stores than do-it-yourselfers buying lawn mowers and power tools. Both Home Depot and Lowe’s are trying to attract more professional customers.