Americans Are Fixing Up Their Homes Even as Mortgages Stay Expensive. Who Profits From Every Renovation?

Americans are moving at the slowest pace in at least a decade because of expensive mortgages, and are instead investing in homes they already own. An aging housing stock creates steady demand for repairs, but uncertainty and more expensive borrowing are still holding back large discretionary projects. The key is who is closest to essential repairs and who is counting on a construction recovery.

High interest rates and property prices have kept American households in place, shifting some of the money that would have gone toward buying a new home into repairs on existing ones. At the same time, expensive financing and weaker consumer confidence are postponing large, discretionary projects. A home-improvement retailer, a flooring specialist and a lumber distributor serving developers therefore respond very differently to the same trend. The four companies covered span the entire chain, from DIY customers to construction companies: Home Depot $HD, Lowe's $LOW, Floor & Decor $FND and Builders FirstSource $BLDR.

Why Americans Would Rather Renovate

Mortgages Above 7% and the Lock-In Effect

According to Freddie Mac’s weekly survey (PMMS), the average rate on a 30-year fixed-rate mortgage reached 7.40% on October 15, 2026, and stood at 7.24% on October 29, 2026. As recently as November 2025, the survey reported 6.24%. The second half of 2026 therefore brought another increase in financing costs, not the expected easing.

The key to understanding the market is the gap between new and existing mortgage rates. According to the FHFA’s National Mortgage Database, in the second quarter of 2026 roughly 49% of all outstanding mortgages had rates below 4% and approximately 19% had rates below 3%. The average rate on existing mortgages was about 4.4%. A household selling its home and buying another would often be trading a 3% mortgage for one above 7%. This so-called mortgage rate lock-in reduces the number of transactions.

Few Transactions, Prices Still Rising

In September 2026, existing homes were selling at a seasonally adjusted annual rate of 3.99 million, according to the National Association of Realtors, down 2.2% from a year earlier. The median price rose 1.3% year over year to 417 500 USD, marking the 39th consecutive month of annual growth. Supply increased to 1.60 million homes, or 4.8 months’ worth. The market has not collapsed; it has simply stalled. Prices leave owners with substantial home equity, but the low number of sales limits moving-related renovations, which have traditionally been among the costliest.

An Aging Housing Stock as a Fundamental Driver

According to The State of the Nation's Housing 2026 report by the Harvard Joint Center for Housing Studies (JCHS), the median owner-occupied home in the US is 42 years old, compared with 33 in 2010. The Improving America's Housing 2025 report says that in 2023, replacement projects such as roofs, windows and air conditioning accounted for 49% of home-improvement spending. An aging housing stock is a slow but reliable source of demand. A roof or boiler has to be replaced regardless of interest rates.

Essential Repairs Versus Discretionary Renovations

Distinguishing between two categories of spending is essential to drawing investment conclusions:

• Essential repairs and maintenance: replacing roofs, systems, water heaters and appliances, and repairs after storms. Demand is stable, but varies with the weather. In the third quarter of fiscal 2025, Home Depot explicitly said results fell short because of a lack of storms.

• Discretionary renovations: new kitchens, bathrooms, floors and extensions. These projects are funded from savings or home-equity loans and are sensitive to interest rates, consumer confidence and home sales.

Results for 2026 confirm this difference: Home Depot reports a predominance of smaller projects, Lowe's is seeing pressure on DIY customers’ discretionary spending, and Floor & Decor has posted comparable-sales declines in all three quarters.

So, Do Expensive Mortgages Support Renovations?

The data point to “yes, but only partly.” The lock-in effect supports maintenance and smaller improvements to existing homes. But high rates also make loans for major projects more expensive and dampen home sales, one of the strongest triggers for renovations. The result is spending at a record-high but stagnant level. Structural demand for repairs creates a floor; the consumer-spending cycle determines whether growth emerges above it.

Market Size and Long-Term Potential

How Much Americans Spend

Market size depends on how it is defined. In October 2026, JCHS’s leading indicator, LIRA, which tracks spending on improvements and repairs to owner-occupied homes, estimated annual spending at around 525bn USD. According to LIRA, year-over-year growth is expected to slow from 2.4% in the fourth quarter of 2026 to 1.5% in the third quarter of 2027. A broader JCHS measure, which also includes rental housing, showed a peak of 611bn USD in 2022. The difference between the figures is therefore not an error, but a result of their different scopes.

New Construction Is Weakening Faster

According to the Census Bureau, housing starts in September 2026 ran at an annual pace of 1.221 million units, down 7.4% from a year earlier. Single-family housing starts (859 thousand) did rise 2.6% year over year, but permits for single-family homes fell 4.8% to 845 thousand and completions fell 14%. The median price of a new home (400 400 USD) was below the price of an existing home in September 2026, so developers are supporting sales with prices and incentives, putting pressure on margins throughout the supply chain.

Professionals, DIY Customers and Growth Segments

The market is split between professional contractors (remodelers, tradespeople and property managers) and DIY customers. Home Depot says its sales are roughly evenly divided between the two groups. Professionals shop more frequently, buy in larger volumes and are less sensitive to the price of individual items, making them more strategically valuable to companies.

The segments most likely to grow fastest are those tied to the aging housing stock and aging homeowners. JCHS reports that households aged 65 and older accounted for 27% of home-improvement spending in 2023, up from 14% in 2003. Accessibility upgrades, energy efficiency and replacement of home systems therefore have a better structural outlook than cosmetic renovations.

Competition and Barriers to Entry

Home-improvement retail is effectively a duopoly of two chains, complemented by thousands of local retailers. Barriers to entry include store density, purchasing power and logistics for bulky goods. Building-materials distribution, by contrast, is fragmented and consolidating through acquisitions.

Home Depot: The Renovation Leader

Business Model and Customers

As of August 2, 2026, Home Depot operated 2 364 stores and more than 1 340 branches of distributor SRS. For fiscal 2025 (ended February 1, 2026), it posted revenue of 164.7bn USD, up 3.2% year over year, with comparable sales up 0.3%. Its assortment covers building materials, décor and hardlines (tools, systems and garden), with each of these groups accounting for roughly one-third of sales.

SRS and GMS: A Bet on Professionals

In 2024, Home Depot bought distributor SRS Distribution for approximately 18.25bn USD, including debt, the largest acquisition in the company’s history. In September 2025, through SRS, it added drywall and ceiling-systems distributor GMS, with an enterprise value of 5.5bn USD. The strategic logic is to serve a professional’s entire project—from roof to interior to garden—with its own truck fleet and sales teams.

But the acquisitions have lowered returns on capital: ROIC fell from 31.3% in fiscal 2024 to 24.8% over the last twelve months. Roofing distribution is also cyclical; industry shipments of roofing materials fell 28% year over year in the fourth quarter of fiscal 2025.

Results in 2026

In the second quarter of fiscal 2026 (through August 2, 2026), revenue rose 5.7% to 47.9bn USD. Comparable sales increased 1.7%, with the average transaction value up 2.8% and the number of transactions down 1.0%. Adjusted operating margin was 14.7%. Growth is therefore driven by prices and higher purchase values, not by customer numbers.

Earnings quality needs to be viewed with caution. In the second quarter, the company recorded approximately 730m USD from IEEPA tariff refunds as a reduction in cost of goods sold and inventory. This is a one-off item that management included in its outlook. Management’s fiscal 2026 outlook calls for revenue growth of 2.5 to 4.5%, comparable sales ranging from flat to up 2%, and adjusted earnings per share up 0 to 4% from 14.69 USD.

Cash and Debt

In the first six months of fiscal 2026, Home Depot generated 11.4bn USD in operating cash flow, with capital expenditures of 1.7bn USD, and paid 4.6bn USD in dividends. It has not bought back shares since the SRS acquisition. Long-term debt, including amounts due within one year, was 48.6bn USD, with a further 4.2bn USD in short-term debt. Management expects annual net interest expense of around 2.3bn USD.