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Marketplace Morning Report

Home Depot still doing well despite cooling housing market

Amy Scott Nov 13, 2018
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A sign is posted in front of a Home Depot store on Aug. 14, 2018 in El Cerrito, California.
Justin Sullivan/Getty Images

Inside a small, red, two-story house in Denver’s Stapleton neighborhood, a worker is on three-foot stilts, painting the dining room wall.

“We are just remodeling the first floor,” said Leo Perez, co-owner of A&D Construction, a small company with a crew of three. “Kitchen, half bath. We ripped out the old carpet.”

This remodel is one of five the company has going at the moment.

“We’re just glad that we are staying busy every day and can provide some work for our employees,” Perez said.

A&D, like many remodelers and do-it-yourselfers, is also buying a lot of paint, lumber and hardware from stores like Home Depot.

Despite signs of a cooling housing market, Home Depot turned in a $2.9 billion profit for the third quarter and raised its outlook for the rest of the year. Rising interest rates and a lack of supply are slowing down the home sales that help drive Home Depot’s profits. But the business makes money when people stay in their homes, too.

There are some signs of trouble for Home Depot and similar companies, said Jaime Katz, a Morningstar analyst. Existing home sales have fallen six months in a row.

“For every transaction that isn’t happening in the housing market you don’t have anybody preparing their house for sale, and then you don’t have anybody adapting the house to their own preferences when they move in,” Katz said.

But other forces will likely prop up spending on home renovations and repairs, said Robert Dietz, chief economist at the National Association of Home Builders.

“As individuals remain in their homes longer they’re likely to undertake those larger projects because simply their household has changed,” Dietz said. “Maybe they’re adding kids, or their kids are becoming teenagers and they have different space requirements for their homes.”

In Denver, A&D Construction has been busy working on existing home projects.

“It’s kind of ‘We’re staying here, we want to enjoy the house,’” said Perez of her customers. “That’s why we’re getting a lot of clients here now.”

Click the audio player above to hear the full story.

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