Remodeling demand is holding its own in lower-ticket home repair-and-maintenance work, but large discretionary renovations remain under pressure, as economic uncertainty, high interest rates and affordability constraints hold consumers back.
Stalled momentum was a key takeaway from the latest earnings calls from The Home Depot and Lowe’s, both held last week.
While executives at both companies remain bullish on the long-term prospects for remodeling and home improvement, they also said demand is likely to languish at current levels through the end of 2026. Third-party research similarly indicates that demand for the sector will remain cool for at least the next year.
Essential repairs remain resilient, but big projects take a hit
During a Q2 2027 earnings call on August 18, The Home Depot CFO Richard McPhail said that the company “saw broad-based demand across the business.” However, while remodeling demand is holding up in smaller repair-and-maintenance and replacement contractor work, large discretionary renovations remain under pressure.
Company executives cited high interest rates, housing unaffordability, inflation, tariffs, fuel and energy prices and broader economic uncertainty as factors restraining larger projects.
“There’s certainly still a lot of pressure, obviously, on larger…discretionary finance projects. That’s a continued narrative that we’re still seeing in the business,” said Bill Bastek, The Home Depot EVP of Merchandising, during the call.
During an earnings call on August 19, Lowe’s executives also relayed that the home improvement market remains fundamentally healthy from a long-term perspective, but is stuck in a period of unusually weak discretionary demand.
“Affordability remains kind of the major concern. That’s across rates, it’s across home prices, insurance, taxes. That’s really translating to prioritization of repair maintenance spend and the projects that our consumers are engaging in, and this ongoing trend of caution around big-ticket discretionary,” Lowe’s CFO Brandon Sink said during the call.
Lowe’s Pro division is outperforming DIY, but the Pros are also seeing consistently smaller projects.
“Our core Pro customers shared that their backlogs are steady. However, they are seeing a homeowner who is more cautious about their spending. This is leading to consistently smaller projects focused on repair and maintenance needs rather than larger remodeling jobs,” Lowe’s Executive Vice President of Stores Joe McFarland said.
According to the University of Michigan’s consumer sentiment index, U.S. consumers are feeling less confident than they did a year ago. In January 2024, consumer sentiment came in at 79, but that fell to 56.4 as of January 2026. By May, the reading bottomed out at 44.8 amid concerns over the war in Iran. Despite bouncing back to 51 in August, consumer sentiment remains 720 basis points below where it was a year ago, suggesting the average American is more cautious than in recent memory.
“Our core consumer is a middle-income homeowner. They have a strong personal balance sheet. They have real disposable income growth. Their house is getting older, and they have increased equity. But the caveat to all of that is that this consumer is being cautious,” Lowe’s Chairman, President and CEO Marvin Ellison said in prepared remarks.
Strategic discounting emerges
Lowe’s executives noted that competitors aggressively discounted prices, particularly in seasonal categories such as patios, grills and landscaping. This partially reflects the financial strain that consumers are bearing.
However, the company decided not to match those discounts, as executives view them as a temporary solution that will drive sales but eat into profitability.
“We don’t think it’s the new normal. We think it’s transitory. We think it’s the result of competitors having tariff refund dollars and looking for different ways to use those dollars to drive the top line,” Ellison said. “Historically, as you know, home improvement tends to be a very rational and predictable promotional and price environment. We believe we’re going to get back to that in the second half of the year.”
The near-term outlook
U.S. housing turnover sits at roughly 3.0%, a decades-long low that has been attributed to the “lock-in effect.” Homeowners with low mortgage rates are staying put longer to avoid ballooning their borrowing costs.
Low housing turnover matters for a company like Home Depot because mobility is a major catalyst for home-improvement spending. Buyers typically spend on paint, flooring, appliances, lighting, landscaping and renovations, while sellers often make repairs and upgrades before listing. That means fewer home transactions and fewer large projects tied to buying and selling, limiting a key source of demand.
However, with many homeowners electing not to move, another long-term remodeling opportunity emerges. People who can’t or don’t want to move may renovate the house they already own, and many of them have substantial equity that they can tap into for projects.
The nation’s housing stock also continues to age. In 2024, the average age of owner-occupied homes was 42 years old, up from 31 years old in 2005, according to the National Association of Home Builders. This trend bodes well for remodeling and home improvement long-term, as aging homes typically require more structural repairs, updates and modernizations.
While The Home Depot executives noted this long-term opportunity, the short-term picture remains more uncertain and volatile. Lowe’s executives similarly believe that larger projects aren’t disappearing. They’re simply being deferred until consumers feel more confident.
“We know that this environment we’re in is cyclical. It goes down, but at some point it comes back up,” Ellison said.
Executives at both firms indicated that demand is likely to remain roughly at first-half levels for the rest of the year. However, a recent report from Harvard University’s Joint Center for Housing Studies projected that remodeling spending will slow further through mid-2027.
Harvard’s latest Leading Indicator of Remodeling Activity (LIRA) forecasts that annual growth in spending on home improvements and repairs will slow to just 0.5% year over year by Q2 2027. That would mark a meaningful slowdown.
According to the report, permitting and retail spending on building products have flattened, suggesting actual renovation activity is cooling. This slowdown is being driven by a few main factors:
- Economic uncertainty is making consumers more cautious about committing to discretionary renovation projects.
- Reduced housing starts are limiting remodeling demand.
- Declining home sales are removing a major source of renovation activity.
“Until home sales rebound from current low levels, remodeling expenditures are likely to stay at this pace,” the report said.