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.
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.
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.
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.
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.
To contact the author of this story:
Rani Molla in New York at firstname.lastname@example.org
To contact the editor responsible for this story:
Timothy L. O'Brien at email@example.com