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 Navigating the Storm: How Housing Slowdown and Tariffs Are Impacting Home Depot and Lowe's Earnings in 2025

 Key Points

- The US housing market is experiencing a significant slowdown in 2025, with builder confidence at a low of 32 in August and single-family starts down 4.6% in June, directly weighing on retailers like Home Depot and Lowe’s.

- In Q2 2025, Home Depot delivered $45.3 billion in sales, a 4.9% annual gain, though results missed forecasts due to soft demand for high-priced items.

- Tariffs are adding pressure, with Home Depot planning modest price hikes on certain imports, similar to John Deere's $600 million hit, potentially raising costs for consumers.

- Both companies are shifting focus to professional contractors to offset DIY declines, with analysts predicting a market rebound if interest rates fall.

- Investors should watch for Lowe's Q2 earnings on 20 August 2025, expected to show 1.9% revenue growth, as a bellwether for the sector's resilience.

 Introduction

Imagine stepping into your local Home Depot or Lowe's, aisles brimming with tools, paint, and lumber, but the buzz of eager DIY enthusiasts seems quieter than usual. That's the reality in 2025, as a sluggish housing market and escalating tariffs put the squeeze on these home improvement giants. With Home Depot's latest earnings just released and Lowe's report looming, we're diving into how these forces are reshaping their bottom lines. Whether you're a homeowner planning a renovation or an investor eyeing stocks, understanding these dynamics could save you time and money. Let's break it down.

 The Current State of the US Housing Market

The US housing market in 2025 is far from its post-pandemic boom, showing clear signs of a slowdown that's rippling through related industries like home improvement. Builder confidence, as measured by the NAHB/Wells Fargo Housing Market Index, plateaued at a relatively low level of 32 in August 2025, marking 16 consecutive months in negative territory. This index, which gauges sentiment among single-family home builders, dropped one point from July, reflecting ongoing frustrations with high mortgage rates, weak buyer traffic, and regulatory hurdles in land development.

Why the gloom? Elevated mortgage rates—stuck in the upper 6% range—are keeping potential buyers on the sidelines, leading to slower sales and longer market times. Existing-home sales declined 2.7% in June to a seasonally adjusted annual rate of 3.93 million, with no year-over-year change, while new home sales fell 6.6% compared to the previous year. Inventory is rising, up over 33% from 2024, but still below pre-pandemic levels, creating a buyer's market in some regions like Texas and Florida.

New construction is also taking a hit. Single-family housing starts dropped 4.6% in June, and completions were down 15.5% year-over-year. Builders are responding with incentives: 37% reported price cuts in August (average reduction of 5%), and 66% offered sales perks, the highest since the post-Covid era. Home prices are still climbing, albeit slowly, with a 2.3% annual gain in May, but experts predict regional drops where inventory surges.

The impact on Home Depot and Lowe’s: a slowdown in major renovation projects. Consumers are prioritizing essentials over renovations, with year-over-year sales for building materials dropping at least 4% monthly from May to July. As one analyst put it, affordability is key to economic growth, and without rate cuts, the slowdown could persist.

 Practical Tips for Homeowners

- Monitor mortgage rates: If they dip below 6%, it might be time to refinance or buy, boosting local markets.

- Shop smart: Look for builder incentives or retailer promotions on smaller projects like painting or landscaping.

- Consider energy-efficient upgrades: These could qualify for tax credits, offsetting costs in a tight market.

(Internal link: Check our guide on [Budget-Friendly Home Improvements During Economic Downturns] for more ideas.)

Home Depot's Q2 2025 Earnings Report

Home Depot kicked off the week's earnings with its Q2 fiscal 2025 results, released on 19 August, painting a picture of resilience amid headwinds. The retailer reported net sales of $45.3 billion, up 4.9% from $43.2 billion the previous year, driven by growth in comparable sales and acquisitions. However, this fell short of Wall Street's $45.5 billion estimate, leading to a mixed market reaction—shares rose 4% initially on maintained guidance.

Net earnings were flat at $4.6 billion, while diluted EPS eased to $4.58 from $4.60; adjusted EPS at $4.68, narrowly missing the $4.71 estimate. Comparable sales grew 1.0% overall, with US stores up 1.4%, a positive shift after quarters of declines. CEO Ted Decker highlighted momentum in smaller projects. noting that while customers are more active overall, they’re steering clear of major outlays.

The company reaffirmed its full-year outlook, projecting total sales growth of 2.8%, a 1.0% rise in comparable sales, and adjusted EPS down about 2% from 2024.This stability comes despite the housing slowdown, with credit card data showing flat or minor drops in monthly sales.

 Key Examples from Home Depot's Performance

- Growth in pro segments: Categories like concrete and siding saw gains, targeting contractors who buy in bulk.

- Consumer caution: Big-ticket items over $1,000 declined, reflecting allergy to spending amid economic uncertainty.

(External link: For full details, visit Home Depot's Investor Relations page.)

 Lowe's Upcoming Q2 2025 Earnings: What to Expect

With Lowe's set to report on 20 August, anticipation is high for insights into how it's faring in the same environment. Analysts project revenue of $24.02 billion, a 1.9% increase year-over-year, and EPS of $4.25, up 3.4% from $4.10 in Q2 2024. This modest growth mirrors Home Depot's, but Lowe’s has demonstrated resilience through digital growth and strong pro demand.

Like its rival, Lowe's faces sales drops in building materials, with June down 1.5% per credit data. However, its focus on pros—sourcing 20% from China but diversifying—could buffer impacts. Investors will scrutinize guidance for hints on a rebound, especially if Fed rate cuts materialize in September.

 Tips for Investors

- Compare metrics: Look at comparable sales and pro segment growth versus Home Depot.

- Keep an eye on tariff commentary—Lowe’s may signal price hikes.

- Diversify: Consider ETFs tracking retail or housing for balanced exposure.

(Internal link: Read our analysis on [Retail Stocks to Watch in 2025] for broader insights.)

The Tariff Challenge: Lessons from John Deere

Tariffs are emerging as a critical test, with Home Depot warning of "modest" price increases on certain imports due to higher rates. CFO Richard McPhail noted that less than half of inventory is imported, and the company is diversifying suppliers to cap any country's share at 10%. This isn't across-the-board; some items might even be discontinued to avoid hikes.

A parallel comes from John Deere, whose Q3 earnings showed a $1.29 billion profit but a 9% sales drop to $10.36 billion, exceeding estimates yet prompting a guidance cut. Tariffs hit hard, costing $200 million in Q3 and projected at $600 million annually, up from $500 million. Deere's stock fell 7%, highlighting how trade policies amplify slowdowns in equipment sectors—much like home improvement, where imported materials raise costs.

For Lowe's, tariffs could concentrate hikes in H2 2025, but North American sourcing (over 50%) offers some shield.

 Practical Tips to Mitigate Tariff Impacts

- Buy local: opt for US-made products to avoid tariff surcharges.

- Stock up early: If planning projects, purchase now before potential increases.

- Negotiate with pros: Contractors may absorb some costs for bulk buys.

(See Reuters for detailed coverage on tariff impacts.)

 Strategies for Navigating These Challenges

Both Home Depot and Lowe's are adapting by targeting professionals, who are less sensitive to prices and drive bulk sales. Home Depot's GMS acquisition bolsters this, while Lowe's expands digital tools for pros. Analysts see them outperforming smaller rivals through brand strength and pricing power.

Consumers can:

- Focus on small projects: Painting or organizing yields high ROI without big spends.

- Use apps: Track deals via retailer apps for timed savings.

- Go green: Eco-upgrades often come with rebates, easing budget strains.

Investors might hold steady, as a rate cut could spark recovery.

(Internal link: Explore [Investment Strategies for Volatile Markets] on our blog.)

 Future Outlook and Predictions

Looking ahead, the housing market may stabilize if rates fall to 5.5% by late 2025, boosting sales and inventory. Experts forecast single-family starts down 3% this year but rebounding in 2027. For Home Depot and Lowe's, analysts like those at Boffa predict share gains, with Strong Buy ratings dominant. Tariffs remain a wildcard, but diversification could limit damage.

In a recession scenario, demand might dip further, but primary sources suggest no crash—thanks to low inventory. Overall, patience remains essential; a Fed pivot could shift the market’s course.

 Conclusion

The housing slowdown and tariffs are putting Home Depot and Lowe’s to the test. Home Depot’s steady Q2 results underscore its resilience, while Lowe’s upcoming report is set to provide further insight. Challenges remain—soft builder confidence, cautious spending, and rising costs—but strategic pivots toward pro customers and supply chain efficiencies offer a path forward. For homeowners, it’s a season for smart, small-scale projects; for investors, it’s a chance to buy the dips. Stay informed as the market evolves—subscribe to our newsletter for weekly updates on retail and housing trends or share your thoughts in the comments below. What home project are you tackling next?

Citations:

-  Understanding the US Housing Market in 2025: Mortgage Rates, Affordability, Growth Trends

-  Housing Market Predictions for 2025

-  John Deere to Cut Jobs Amid Trump Tariffs Fallout

-  X Post by Meow Meow News

-  The Home Depot Q2 2025 Earnings Release PDF

-  Home Depot Plans Price Hikes in Response to Tariffs

-  Lowe's Companies, Inc. to Host Second Quarter 2025 Earnings Conference Call

-  Lowe's Q2 2025 Earnings Preview: Is LOW Ready to Surprise the Street?

-  Builder Confidence Plateaus at Relatively Low Level

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