Home improvement stores take a housing market hit

Consumer sentiment took a tumble in in August, but retail sales jumped 1.2% after a plunge the month prior.

The bump was led by gas stations and nonstore retailers (like Amazon, for instance).

One category experienced a slight dip: building material stores.

Rachel Drew, director of the remodeling futures program at the Harvard Joint Center for Housing Studies, has some old, dying trees she’s keeping an eye on at her home in Massachusetts.

“You know, they create a potential risk if they were to come down in a storm and to hit our house or hit our cars in the driveway,” she said.

But she has been putting off cutting them down. Because the labor, the chainsaw, and the hydraulic tree jacks are all really expensive right now. In her work, Drew is seeing consumers doing the same — holding off on home projects that aren’t dire.

“Like [waiting to] renovate your kitchen and redo your cabinetry and your countertops,” she said.

People who aren’t renovating don’t need supplies. Jaime Katz, senior equity analyst for Morningstar, points out that isn’t great news for building material stores.

“If you look back over the last handful of quarters across names like Lowe's or Home Depot, they've really struggled to stimulate transaction growth,” Katz said.

Of course, there are projects that consumers just can’t put off.

“If your refrigerator fails, if your toilet breaks, if you have some sort of like water heater issue,” she said.

But getting more people into hardware stores or lumber yards requires home sales, per Zack Fritz, chief operating officer at Sage Policy Group.

“If you're preparing to sell your house, you repaint, you replace appliances, you do little ticky-tack repairs,” Fritz said.

But people who aren’t moving tend to just live with that kind of stuff. And existing home sales are down.

“Of course, the underlying factor there is just [rising] mortgage rates,” Fritz said. ‘Everything really ties back to that.”