Home Depot seen as defensive play amid U.S. housing slowdown

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Home Depot amid US housing slowdown

Highlights

Private residential construction spending fell 5.5% month-over-month and 8.9% year-over-year in September, while housing starts dropped 5.2% to 1.221 million.
Home Depot's fiscal Q2 sales rose 5.7% to $47.9 billion, with U.S. comparable sales up 1.3% as customers shifted spending toward repair and maintenance.
Home Depot forecasts fiscal 2026 total sales growth of 2.5%–4.5%, comparable sales between flat and 2%, and adjusted EPS growth from flat to 4%.

Housing weakness broadens across construction and sales

As reported by Weiss Ratings, the case for a housing recession is building as residential activity weakens across multiple indicators even though overall U.S. economic growth remains in positive territory.

The analysis argues that third-quarter GDP growth of 3.4% looks less robust once heavy spending tied to data centers and grid upgrades is stripped out. On that basis, growth falls closer to 1.3%, leaving housing as one of the sectors under the greatest pressure.

September construction spending adds to that view. Private residential construction spending fell 5.5% from the prior month and was down 8.9% from a year earlier, while housing starts dropped 5.2% to a seasonally adjusted annual rate of 1.221 million, 7.4% below a year earlier.

Single-family starts declined 4.6% to an annualized 859,000 units, and single-family building permits fell 4% to 845,000, leaving permits 4.8% below a year earlier. Housing completions were down 14% year over year, new-home sales fell 0.6% and were off 5.3% from a year ago, while existing-home sales were down 2.2% on the year.

The pressure is also showing up in pricing and incentives. In October, 43% of builders cut prices, the highest share since at least 2020, and roughly two-thirds offered incentives such as mortgage-rate buydowns.

Affordability strains support repair spending outlook

Despite the weaker pace of transactions and construction, the analysis does not describe a housing price collapse. Existing-home sales ran at an annualized pace of 4 million in September, yet the median existing-home price still rose 1.3% from a year earlier to $417,500.

High mortgage rates are freezing potential buyers out of the market, while many existing owners are staying put because they do not want to give up lower mortgage rates locked in earlier years. That dynamic is restraining mobility but is also seen as supportive for companies tied to repair and maintenance rather than home turnover.

On that basis, Home Depot is presented as a relative defensive pick. Its fiscal second-quarter sales rose 5.7% to $47.9 billion, while U.S. comparable sales increased 1.3%, and management said customers continue to spend on smaller projects as repair and maintenance demand holds up despite affordability pressures.

Home Depot expects fiscal 2026 total sales growth of about 2.5% to 4.5%, with comparable sales ranging from flat to 2% growth. Adjusted earnings per share are forecast to range from flat to 4% growth, suggesting modest but resilient performance if homeowners continue to spend on essential upkeep while remaining in place longer.

Our earlier article on the U.S. AI data center buildout examined how soaring funding costs, construction delays, and power constraints are starting to challenge developers’ ability to deliver projects on time. We noted that only a portion of planned facilities look realistic as financing tightens and grid and community pushback grows, raising questions about how much this investment wave can translate into completed builds.

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