Home improvement and building stocks were under pressure Monday after construction spending was unexpectedly soft in May, down 0.1% from a revised 0.3% increase the month prior.
The data weighed on stocks in the category with Home Depot (NYSE:HD) and Lowe’s (LOW) down 2% and 3%, respectively at the close of trading Monday. Also trading with a loss were shares of Floor & Decor Holdings (FND) down 4%, Arhaus Inc (ARHS) down more than 6%, and LL Flooring Holdings (LL) lower by 3.5%.
Weighed down by persistently high mortgage rates and increased supply of existing housing, construction spending for May was expected to increase 0.2% from April’s initial -0.1% print. Spending on private construction was down 0.3%, and investment in residential construction fell 0.2% from a 0.9% gain in April.
Early this year, the Joint Center for Housing Studies of Harvard University released a study indicating a $30B drop in home improvement spending in 2024 from the year prior. According to the study, spending on home improvement increased from the post-pandemic first quarter of 2021 until Q3 of 2023 by 32% to $490B, but has since been on a steady decline. While this is most likely due to abnormal heights reached during the pandemic, the higher cost of building supplies and high financing costs are no doubt contributing to the slower pace of home improvement projects.