Rising home equity levels could help stoke pent-up demand for these two stocks

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Breaking News: Business,Lowe's Companies Inc,Home Depot Inc

A recovery in home improvement spending may not be on the horizon until interest rates ease, but consumers may be eager to tackle those delayed projects.

Home Depot Chief Financial Officer Richard McPhail couldn't ignore a difficult reality on the retailer's most recent earnings call: higher interest rates are forcing customers to shy away from big projects. "You have this odd irony of every sound bite you read, ... 'they're coming down soon,'" McPhail said, referring to the expectation of lower interest rates ahead, as he talked with investors on an earnings call on May 14.

From the fourth quarter of 2023 to the first quarter of this year, the so-called equity rich share of mortgages increased in 23 states, albeit by less than one percentage point, the firm said. Homeowner equity levels remain elevated compared with the pre-pandemic period. Higher levels of home equity, combined with a desire to tackle deferred projects, could be a plus for Home Depot and Lowe's once rates move lower.

 

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