A soft housing market has weighed on the home improvement sector over the past year, and signs of a turnaround could remain elusive in 2024, according to the country's biggest home improvement retailer.
"I'd say we have a neutral look on housing for 2024," Home Depot (HD) CEO Edward Decker said on the company's fourth quarter earnings call Tuesday. "We don't think there's incremental pressure nor do we think that we're quite ready for a hockey stick recovery."
The retailer said that its fourth quarter sales declined 3% to $34.8 billion from the year-earlier period. It expects sales growth of 1% in its fiscal year 2024.
Home Depot stock was up about 0.2% in afternoon trade on Tuesday.
Existing home sales slumped last year given rising interest rates, limited housing inventory, and lower affordability, which in turn led to some softness around home improvement spending as turnover in the housing market slowed.
And with the odds of imminent rate cut from the Federal Reserve falling, Decker expects to see an extension of this moderation in home spending through the first half of this year.
"[Home Depot CFO Richard McPhail] has been talking for some time [about] the Fed's stance of higher for longer," Decker added. "I think we now we have an appreciation that longer is going to go through the first half of this year."
The comments echoed what others in the housing industry have said of late.
"But the inflation numbers, if they continue to stay persistently higher, then, that calls into question whether or not the Fed is going to cut three times, maybe they only cut two, and then when do they cut?" NAHB CEO Jim Tobin told Yahoo Finance Live last week.
"This idea that they're going to cut in the spring seems to be off the table now."
Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards
While the exact timing of Fed rate cuts is up for debate, an eventual reduction in rates should help Home Depot, Oppenheimer managing director Brian Nagel told Yahoo Finance Live Tuesday morning.
“We have a housing market in the US that is largely in a state of paralysis. There’s just not much happening right now. Lower rates will help unlock that paralysis and serve as a better driver in better sales for Home Depot," Nagel said.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.
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