A weak real estate market weighed on the home improvement sector last year, and there may be no signs of a turnaround in 2024, according to the country's largest home improvement retailer.
“I would say we have a neutral view of the housing market in 2024,” Home Depot (HD) CEO Edward Decker said on Tuesday's fourth-quarter earnings call. “We don’t think there’s any increasing pressure, nor do we think we’re really ready for a hockey stick recovery.”
The retailer said its fourth-quarter sales fell 3% to $34.8 billion compared to the same period last year. Sales growth of 1% is expected for the 2024 financial year.
Home Depot shares rose about 0.2% in afternoon trading on Tuesday.
Existing home sales slumped last year due to rising interest rates, limited housing inventory and lower affordability, which in turn led to some moderation in home improvement spending as sales in the real estate market slowed.
And with the likelihood of an imminent interest rate cut by the Federal Reserve decreasing, Decker expects this restraint in home spending to continue in the first half of this year.
In an aerial photo, a sign is seen on the outside of a Home Depot store on February 21, 2023 in El Cerrito, California. (Justin Sullivan/Getty Images) (Justin Sullivan via Getty Images)
“[Home Depot CFO Richard McPhail] has been talking for some time [about] “The Fed’s stance on raising interest rates for longer,” Decker added. “I think we now understand that interest rates will last longer in the first half of this year.”
The comments echoed what others in the housing industry have been saying recently.
“But if inflation numbers continue to stay consistently higher, the question becomes whether or not the Fed will cut rates three times, maybe just two, and then when?” NAHB CEO Jim Tobin told Yahoo Finance Live last week.
“That idea that they’re going to make cuts in the spring seems to be off the table now.”
Read more: What the Fed's rate decision means for bank accounts, CDs, loans and credit cards
While the exact timing of the Fed's rate cuts is up for debate, an eventual reduction in interest rates should help Home Depot, Oppenheimer CEO Brian Nagel told Yahoo Finance Live on Tuesday morning.
The story goes on
“We have a real estate market in the USA that is largely paralyzed. There's just not much happening at the moment. “Lower interest rates will help overcome this paralysis and provide Home Depot with better sales,” Nagel said.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.
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