Home improvement demand hit by uncertainty, housing pressure

U.S. consumers’ appetite for spending on home improvements remains in flux, according to Home Depot, which on Tuesday cut its annual profit outlook on “weaker home improvement demand [and] tepid consumer spending,” CNBC reported.

The big picture: Economic forecasts for 2025 included tax cuts, improved housing activity, and falling interest rates, conditions that support home spending, particularly on financing-heavy projects, including HVAC replacements. 

• Yes, but: “What we saw was that ongoing consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand,” Home Depot CFO Richard McPhail said Tuesday.

Zoom in: Sales of existing homes result in a change to HVAC systems “usually” 20 to 25 percent of the time, according to Carrier estimates, as homeowners make upgrades before or after moving. 

• As of September, the latest available data, the annualized rate of U.S. existing home sales has remained largely unchanged since January, and sits 36 percent lower than September 2020. 

Between the lines: Both Home Depot and Lennox have recently described homeowners as being in a ‘deferral mindset.’ “There was a clear shift toward system repairs rather than full replacements,” Lennox CEO Alok Maskara said in late October, referring to the third quarter. 

• Carrier CEO David Gitlin, a week later, noted the company hasn’t seen outsized growth in parts sales; however, “it’s hard not to imagine that there are more consumers opting for repair over replace,” he said, “and we’re hearing some sporadic pickup of that in certain locations.” 
• Of note: The observations come as the share of U.S. consumers who felt it was a good time to buy ‘large household durables’ — an indicator of HVAC purchasing intent — in September fell to its lowest level in the past 12 months, as Homepros reported. 

Meanwhile, other factors “may also be having a chilling effect,” CNBC noted, including “the prolonged government shutdown [and] an uptick in corporate layoff announcements.”

Looking ahead: The combination of forces at play has “led to a bit of a waiting game,” the news outlet added. “At this point, it’s hard to identify near-term catalysts that would lead to acceleration,” McPhail said. 

What we’re watching: The Federal Reserve cut its benchmark interest rate in both September and October, with analysts projecting a third cut at its next meeting in December — and two more next year. 

• Similarly, the National Association of Realtors forecasts a 14 percent nationwide increase in existing home sales for 2026, Chief Economist Lawrence Yun said Friday. “As we go into next year, the mortgage rate will be a little bit better.” Go deeper