Home Depot rides America’s housing affordability problem to sales increase on home DIY projects

Home Depot’s sales improved during its second quarter as customers focused on smaller projects during the summer months with the U.S. housing sector still mired in a slump .

Revenue increased to $47.86 billion from $45.28 billion, edging out the $47.24 billion that Wall Street had expected, according to a survey by FactSet.

Globally, sales at stores open at least a year, a key indicator of a retailer’s health, climbed 1.7%.

In the U.S., comparable store sales rose 1.3%.

“We saw broad based demand across the business as customers continued to engage in smaller projects,” Chief Financial Officer Richard McPhail said in prepared remarks Tuesday.

Customer transactions slipped 1% in the quarter, but the amount shoppers spent rose to $92.50 per average receipt from $90.01 a year earlier.

Healthy spending on smaller projects during the quarter is encouraging, said Neil Saunders, managing director of GlobalData.

“From our data, the number of smaller projects undertaken during the quarter increased by 1.5% over the prior year,” Saunders said in an email.

“This may sound unimpressive, but it represents a step change from the declines of previous periods.” But Saunders also pointed out a potential weakness that is impacting almost all businesses where credit is sometimes required.

“The number of bigger-ticket projects undertaken remains down, falling by 2.1% over last year,” he said.

“Concerns around financing and a previous lack of moving activity both remain major drags on the bigger-ticket segment.” Homeowners that are currently considering taking out loans using home equity are realizing that it is considerably more expensive now compared with the ultra-low rates Americans could count on in the early 2020s.

A home project that seemed within reach at a 4% to 5% borrowing rate looks a lot more daunting at 8% or higher.

While the average long-term U.S. mortgage rate fell slightly for the first time in six weeks, it is still up from last year and borrowing costs remain steeper than they were a year ago.

The U.S. housing market has been in a slump dating back to 2022, the year mortgage rates began climbing from historic lows that fueled a homebuying frenzy at the start of this decade.