Home Depot Q3 results reflect the real state of U.S. housing

Home Depot’s latest results uncover the existent authorities of the U.S. lodging marketplace — neither frozen nor crashing, but drifting sideways successful a slow, uneven correction.

For the 4th ending November 2nd, the DIY retailer reported modestly affirmative gross maturation — income up 2.8%, helped successful a large mode by its acquisition of GMS — but tellingly, same-store income were fundamentally flat, rising conscionable 0.2%.

According to CEO Ted Decker, it was precisely the deficiency of catalysts that resulted successful “greater than expected pressure,” i.e. a challenging situation for the company. The acceleration successful request the absorption hoped for successful the 3rd 4th “did not materialize.” All successful all, “consumer uncertainty and continued unit are disproportionately impacting location betterment demand,” Decker said.

Decker’s consciousness of unease and hesitation maps cleanly onto the broader lodging market. Even arsenic the information points successful antithetic directions, it nevertheless suggests the assemblage is undergoing a correction alternatively than a much evident and expected boom-bust cycle.

After years of steep increases successful astir large metro areas, location prices are falling, but much truthful successful immoderate places than others. Zillow estimates that 53% of U.S. homes person mislaid worth implicit the past year, the largest stock since 2012, and mostly concentrated successful boomtowns crossed the South and West. Bucking the trend? In immoderate pockets of the Midwest and Northeast wherever inventory remains highly tight, you person immoderate humble appreciation, but present they look to beryllium the the objection that proves the rule.

So determination disparities are existent portion wide request is “soft,” arsenic analysts thin to enactment it, if not dead. Mortgage applications roseate astir 6% past week to their strongest gait since September, adjacent arsenic the mean 30-year fixed complaint hovered astir 6.3%. Refinancing enactment — moving much than treble past year’s levels — is reasonably strong, yet inactive volatile. Consumers privation to move, and astatine slightest a definite magnitude of location owners privation to sell, but neither seems precise convinced the infinitesimal is right.

The company’s level comps amusement conscionable capable enactment to prolong turnover but nary motion of a renovation oregon DIY boom, either. For the retailer, investors, flippers, and contractors often thrust big-ticket spending, but they’re not doing truthful now. Most of all, the company’s ailment astir a “lack of storms” points to the deepest contented — the deficiency of a why. Why flip a location if prices stay excessively precocious to guarantee a abdominous profit? Why bargain a location if owe rates stay precocious and the authorities is unopen down (as it was for overmuch of the 3rd quarter)? Why renovate a room if you can’t spend a location to statesman with?