Tuesday, May 20, 2008

Home Depot and Lowe's Feel the Housing Pain

Home Depot reported a 66% drop in income as consumers cut back on home improvement projects. HD's dismal report came on the heels of Lowe's 18% decline in earnings yesterday. With consumer confidence at 28 year lows, it is not a surprise that folks aren't rushing out to buy new granite counter tops and travertine floors. It is hard to imagine sales for the home improvement retailers bouncing back any time soon. The surge in home remodeling over the past few years was primarily financed with home equity lines of credit on the rapidly increasing equity in people's homes. Several lenders have already slashed or suspended availability of HELOC's to customers, particularly those in areas where housing prices are falling (i.e. most of the country.) Washington Mutual was the latest to join the HELOC slashfest. Those who believe that home equity loans are the next shoe to drop in the credit crisis would be advised to avoid home improvement retailers until the housing outlook improves.

1 comment:

Unknown said...

I love HD. Little hot mustard on one of their dirty water hot dogs is such a print. Best free burnt coffee of all the home improvers! The bottom is near - Spring 2011 - Housing market will be going crazy!