Consumer & Retail

The Golden Generation of Home Improvement

By: Max Rakhlenko, Bradley Jamison, Jaret Seiberg, Chris Krueger, John Miller

Oct. 21, 2024 - 4 minutes

A woman in a home surrounded by supplies for painting a room is petting a dog and looking outside through a window.

Overview:

We view the sector's current downturn as a pause with 2025 being a transition year to a strong 2026.
The near-term catalyst is rate cuts, which should boost both the DIY and professional sectors.
Longer-term, we see multiple trends including rising home prices driving investment in owned properties.

The TD Cowen Insight

We are constructive on the Home Improvement sector as we enter the next cycle. The industry is poised for strong professional sector led growth driven by four key secular tailwinds. We view 2025 as a transition year and are bullish for growth to accelerate led by the professional sector, with potential upside.

Healthy Long-Term Fundamentals for Home Improvement

In our full report, we lay out a framework for investors to assess the path and magnitude a home improvement sector recovery could follow. We also identify the key near- and longer-term drivers of what we expect to be a strong cycle. We are bullish on a home improvement recovery, which we think will start slow before strengthening as homeowner and housing fundamentals improve. The industry has very healthy long-term fundamentals, and we view the current downturn as a pause during what could become a "golden generation".

The Near Term, A Golden Generation

In the near-term, the industry could remain pressured over the next several quarters driven by a pullback in category spend. We think the cycle will turn gradually with 2025 as a transition year prior to a strong 2026. The key near-term catalyst is interest rate cuts, which should strengthen the DIY sector and help unlock bigger professional sector projects as balance sheets and homeowner confidence rebound. Rate cuts should also improve housing affordability and help unfreeze existing home sales, especially given significant pent-up demand to move. However, this could take longer and provide a more secondary tailwind.

The Longer Term, Four Secular Trends

We are bullish on four secular trends that should fuel home improvement spend:

Aging housing stock.
Favorable demographics centered on millennial homeownership and older homeowners aging in place.
New home shortage driving home price appreciation and investments in home improvements.
Record home equity available for extraction which can fund home improvement.

We think these trends are underappreciated, will build over time and position the industry for strong growth over the next cycle. Embedded within these trends is an ongoing shift toward the professional channel and away from DIY.

Meanwhile, the biggest potential risks we monitor are the employment framework that has supported demand, along with housing affordability and the drivers of the supply and demand imbalance, which may persist. Longer-term, we view the skilled labor shortage as potentially a semi-structural headwind that could slow professional sector growth and drive inflationary pressure.

Subscribing clients can read the full report, The Golden Generation Of Home Improvement - Ahead Of The Curve Series, on the TD One Portal

Disclaimer

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Max Rakhlenko

Director, Consumer - Retail & Fitness Research Analyst, TD Cowen

Max Rakhlenko
Director, Consumer - Retail & Fitness Research Analyst, TD Cowen

Biography

Max Rakhlenko is a Director covering the Retail & Fitness sectors. Prior to joining TD Cowen in October 2016, Max Rakhlenko was an equity research associate at Macquarie Capital (USA) covering consumer retail companies. Mr. Rakhlenko received a BA in finance and economics from University of Missouri and is a CFA Charterholder. He has received press coverage from CNBC, TD Ameritrade, Forbes, Barron’s, Sourcing Journal, and others.

Jaret Seiberg

Managing Director, Washington Research Group - Financial Services Policy Analyst, TD Cowen

Jaret Seiberg
Managing Director, Washington Research Group - Financial Services Policy Analyst, TD Cowen

Biography

Jaret Seiberg is the financial services and housing policy analyst for TD Cowen Washington Research Group, which was recently named #1 in the Institutional Investor Washington Strategy category. The team has been consistently ranked among the top macro policy teams for the past decade. Before joining TD Cowen in August 2016, he served in similar roles at Guggenheim Securities, MF Global, Concept Capital and Stanford Financial Group. He began following financial policy in the early 1990s as a journalist covering efforts in Congress to complete the last of the laws from the savings and loan crisis. He tracked the merger wave of the 1990s and Glass-Steagall repeal in 1999 as the deputy Washington bureau chief for American Banker and as the Washington bureau chief for The Daily Deal. His bailiwick at TD Cowen includes issues related to commercial banks, housing, payments, investment banking, M&A, taxes, the CFPB, crypto currency, cannabis and Capitol Hill.

Mr. Seiberg has a BA from The American University and an MBA from the University of Maryland at College Park. He speaks regularly at industry events, is often quoted in the media, and appears on CNBC and Bloomberg TV.

Material prepared by the TD Cowen Washington Research Group is intended as commentary on political, economic, or market conditions and is not intended as a research report as defined by applicable regulation.

Chris Krueger

Managing Director, Washington Research Group - Macro, Trade, Fiscal & Tax Policy Analyst, TD Cowen

Chris Krueger
Managing Director, Washington Research Group - Macro, Trade, Fiscal & Tax Policy Analyst, TD Cowen

Biography

Chris Krueger joined TD Cowen Washington Research Group in August 2016 as the Washington Strategist. Mr. Krueger and the TD Cowen Washington Research Group were recently named #2 in the Institutional Investor Washington Strategy category, where he had been consistently ranked for the past decade along with WRG. Mr. Krueger publishes the DC Download, a must-read daily for Wall Street portfolio managers who want a quick look at the top Washington stories and their impact on the capital markets. Mr. Krueger covers DC macro, fiscal, tax and trade policy.

He held similar positions at Guggenheim Securities, MF Global, Concept Capital, and Potomac Research Group. Earlier he worked for nearly four years on the senior staff of the House of Representatives. He has also worked on several local, state, and federal political campaigns across the country.

Mr. Krueger holds a BA from the University of Vermont and an MA in international relations from King’s College London. He appears frequently on CNBC and Bloomberg and is widely quoted in The Wall Street Journal, FT, Axios, New York Times, Washington Post, and POLITICO. He also speaks regularly at industry events and conferences, including the Milken Institute Global Conference, National Organization of Investment Professionals, and the New York Stock Exchange.

Material prepared by the TD Cowen Washington Research Group is intended as commentary on political, economic, or market conditions and is not intended as a research report as defined by applicable regulation.

John Miller

Managing Director, Washington Research Group - ESG and Sustainability Policy Analyst, TD Cowen

John Miller
Managing Director, Washington Research Group - ESG and Sustainability Policy Analyst, TD Cowen

Biography

John Miller joined TD Cowen Washington Research Group in September 2021 and covers ESG and sustainability policy. TD Cowen Washington Research Group was recently named #1 in the Institutional Investor Washington Strategy category. The team has been consistently ranked among the top macro policy teams for the past decade. Mr. Miller previously served as a vice president and senior ESG research analyst at Calvert Research and Management, part of Morgan Stanley Investment Management, where he developed and built a quantitative, company-level ESG risk/reward assessment framework targeted towards the global energy and utility sectors. Mr. Miller supported the index development and security selection process for Calvert’s Global Energy Solutions Fund and Global Water Fund. Mr. Miller also worked at the U.S. Federal Energy Regulatory Commission (FERC) as branch chief in the Office of Enforcement, Division of Analytics and Surveillance. Earlier, he served as Technical and Policy Advisor to a FERC commissioner and as an energy analyst in FERC’s Office of Enforcement.

Mr. Miller holds a B.A. in economic history and political science from The George Washington University, and a Master’s in global history from The London School of Economics and Political Science, where he focused on developmental economics. John also holds the Fundamentals of Sustainability Accounting certification, which is granted by the Sustainability Accounting Standards Board (SASB).

Material prepared by the TD Cowen Washington Research Group is intended as commentary on political, economic, or market conditions and is not intended as a research report as defined by applicable regulation.