Rani Molla is a Bloomberg Gadfly columnist using data visualizations to cover corporations and markets. She previously worked for the Wall Street Journal.

Home Depot and Lowe’s can thank the housing bust for their recent profits.

The stores' earnings this week were better than other companies in a struggling retail market, as Americans appear to be continuing to prioritize spending on home improvement.

Positive Outlook
Year over year same-store sales
Source: Bloomberg

The housing recovery in the U.S. has been uneven ever since the financial and mortgage crisis that first emerged in 2006, with household formations continuing to outpace the supply of new, single-family homes. 


Coming of Age
Household formation has been outpacing new housing
Sources: U.S. Census Bureau via Bloomberg
Note: Housing formations use a four-quarter moving average and include households formed in the rental market.

Historically, new homes have sold at a 14 percent premium to existing homes, according to research by Bloomberg Intelligence analyst Drew Reading. Currently new homes cost about 30 percent more than existing homes, a situation he says is “unsustainable” and could impede new home sales.

Filling in the Gap
Median home price for new homes is at a 30 percent premium to existing homes
Sources: National Association of Realtors (existing), U.S. Census Bureau (new) via Bloomberg

The result: U.S. residents are more likely than ever to buy an existing home and update it, rather than wading into what they see as the potentially treacherous new-home market. 

“Existing homes are cheaper and buyers can fix up homes and create value,” said Mitch Roschelle, a partner and real estate analyst at PwC, a consulting firm. He attributes the DIY craze to the gap between new and existing home prices, with Americans viewing home improvements as a way of capitalizing on rising property values.

Steady Employment
Month-over-month net change in non-farm payrolls
Source: Bureau of Labor Statistics

The trend has meant a flurry of shopping at stores like Home Depot and Lowe’s, with earnings and same-store sales growing steadily.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Rani Molla in New York at

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