Affordability has become the buzzword on the political scene amid growing concerns over the economy and the housing market.
Home improvement retailers such as Home Depot are also feeling the pain, as customer demand remains lackluster.
The company reported its fourth-quarter earnings on Feb. 24, with sales dropping 3.8% from the fourth quarter of 2024, according to the earnings report.
The company also reported net earnings of $2.6 billion, compared with net earnings of $3 billion for the corresponding prior quarter. While sales fell, they still beat analysts’ revenue expectations for the quarter, according to CNBC.
Edward Decker, Home Depot chairman, president, and CEO, said that what could continue to put pressure on the company is a market that is not performing well and continued consumer uncertainty.
“Our people are telling us, our customers are telling us that they’re not investing certainly in large projects. And that has everything to do with consumer confidence and sentiment, jobs picture, overall price levels, and affordability in the economy,” Decker said in the call, according to the call transcript.
How growing affordability concerns are rippling through the housing market
It’s no secret that the housing market has been very challenging for many Americans for a few years now. Inflation, elevated mortgage rates (although they declined to their lowest level in four years last week), and high prices are all making the path to homeownership difficult for many.
Courtney Klosterman, home insights expert at Hippo home insurance, says that rising housing costs continue to squeeze U.S homeowners and that a homebuyer today needs to earn $121,400 a year to afford a typical home.
“That’s nearly $40,000 more than what the average American earns. These high costs are adding real pressure to homeowner budgets,” she says. “According to Hippo’s 2026 Housepower Report, 76% of U.S. homeowners reported that at least one home-related issue impacted their financial stability in 2025.”
Executives at Home Depot acknowledged that consumers remain cautious due to the economic landscape, which is putting pressure on both housing and home improvement demand.
“Housing turnover has remained at historical lows since 2023, which has significantly reduced demand for projects and other purchases associated with buying and selling a home. Our customers also tell us they have concerns over general economic uncertainty, including inflation, growing job concerns, and higher financing costs,” Richard McPhail, executive vice president and CFO, said in the earnings call.
Blake O’Shaughnessy, founder of real estate platform Ownli, says Home Depot’s earnings didn’t reveal new affordability concerns; they just underscored how deep and persistent they’ve become.
According to him, affordability pressure has been building for years, first through rising home prices, then through higher interest rates, and now, through the cumulative weight of insurance, property taxes, financing costs, and transaction fees that are rarely questioned.
“When a company like Home Depot starts talking openly about consumers pulling back, it’s not about one quick quarter, it’s about a broader shift in psychology,” O’Shaughnessy says.
How homeowners are pulling back on big renovation spending due to economic uncertainty
Stephen Kates, CFP, Bankrate financial analyst, says that the lock-in effect in the existing-home market continues to suppress demand for typical new move-in renovation projects.
“Homeowners with low mortgage rates are reluctant to sell and instead are investing in upgrades to better suit their needs,” he says. While large-scale renovation projects remain limited, smaller projects continue at a steady pace.
Kates suggests a stabilizing labor market could boost homeowner confidence, leading to more high-value renovations, but inflation remains a challenge as remodeling costs strain tighter household budgets.
O’Shaughnessy agrees, noting that the math still feels tight for many homeowners and would-be buyers.
“Even people who technically have equity are cautious, because replacing that mortgage at today’s rates looks painful, and taking on new financing for large projects feels riskier than it did a few years ago,” he says.
Sergio Altomare, CEO and co-founder of Hearthfire Holdings, a real estate private equity and development firm, agrees with Home Depot executives that high housing and financing costs, along with job stability concerns, are the main reasons homeowners are delaying major projects, reflecting broader consumer behavior.
How does this tie into broader housing affordability challenges, such as high prices relative to income and lower transaction activity?
O’Shaughnessy says that what’s happening with renovation spending connects directly to the broader affordability problem, which isn’t just about home prices being high relative to income, “though that’s obviously part of it.”
He explains that it’s about the total cost of housing, from purchase through ownership. Fewer moves mean fewer remodels tied to new purchases, fewer large upgrades to prepare homes for sale, and less overall churn in the housing ecosystem.
“The market slows not because people have stopped needing housing, but because the friction around moving and upgrading has grown too heavy. Affordability is not just a pricing issue; it’s a structural cost issue, and when that structure doesn’t adapt, consumer behavior does,” he says.
What this could mean for the rest of 2026?
Home Depot’s McPhail said in the earnings call he anticipates these pressures will persist “as we have not yet seen a catalyst for an inflection in housing activity.”
Several experts agree with this sentiment, saying that progress in the housing market might be more incremental. Bankrate’s Kates, for instance, says that a significant pickup in renovation activity or housing sales is unlikely until inflation, and consequently borrowing rates, decline more meaningfully. So under the current conditions, activity in 2026 is likely to resemble 2025, he says.
Altomare also says he doesn’t see “a dramatic snap-back scenario” in 2026.
Instead, he says that what’s more likely is a gradual thaw if rates stabilize, incomes continue rising, and consumer balance sheets heal a bit.
“For home sales, that probably means incremental improvement rather than a surge. Inventory should loosen slowly, but affordability will still cap momentum,” he says.
As for remodeling, the split continues, and repair and maintenance work stays solid, he adds. “Large discretionary renovations depend heavily on consumer confidence and financing conditions.”
Finally, Monica Washington-Rothbaum, COO and senior attorney at J&Y Law, also says that, looking ahead, this points to a slower, more selective housing market.
Home sales may stay constrained unless rates or prices meaningfully adjust, she says.
“Remodeling demand will likely skew toward necessity rather than aspiration. Companies that adapt to value-conscious consumers and smaller, phased projects will be better positioned than those relying on big, discretionary renovations,” she adds.