CNBC’s Jim Cramer discussed Home Depot’s recent earnings report, suggesting that interest rate cuts from the Federal Reserve could prevent a hard landing in the housing market. Cramer believes that lower rates could act as a positive catalyst for the economy, and that the housing market is currently waiting for the Fed to cut rates. Home Depot beat earnings expectations but expects weaker sales later in the year due to higher interest rates and challenges in the consumer landscape. Home Depot’s finance chief, Richard McPhail, mentioned a direct relationship between mortgage rates and activity, stating that homeowners have delayed moving or financing projects due to high rates.
McPhail also highlighted the impact of rate cuts on homeowner activity, especially as the Fed hints at potential rate cuts in the near future. The Fed held rates steady at its last meeting, with Chair Jerome Powell indicating that a rate cut in September is possible if inflation data supports further economic cooling. Cramer suggests that a reduction in mortgage rates could lead to an increase in remodeling and restoration work, as well as more home equity loans. These activities were previously disrupted by supply chain issues during Covid and hindered further by steep rate hikes post-pandemic. Cramer believes that homeowners who are currently staying put due to low interest rates are likely to move once rates decrease.
Cramer expressed hope that a hard landing in the housing market can be avoided if the Fed lowers rates and releases homeowners from the “golden handcuffs” of low interest rates. He believes that Home Depot’s recent investment in a professional roof and pool supplier, areas that could benefit from lower rates, supports this notion. Cramer stated that if mortgage rates were to fall close to 6.5% for a 30-year fixed rate, it could lead to increased spending on remodeling and restoration projects. He emphasized the importance of the Fed taking action to lower rates in order to stimulate growth in the housing market.
Home Depot did not provide a comment in response to Cramer’s analysis. However, Cramer pointed to the potential impact of the Fed’s decision to cut rates on the housing market, and highlighted the importance of unlocking the golden handcuffs created by low interest rates in order to spur activity. He believes that a rate cut from the Fed could provide a much-needed boost to the housing sector, and that Home Depot’s recent earnings report suggests that the retailer is optimistic about the potential benefits of lower rates on the market.
