Home Depot Poised for Comeback as Renovation Spending Surges

Home Depot's stock has taken a hit this year due to rising mortgage rates and investors' perception of it as a proxy for the real estate market. However, Brett Owens, Chief Investment Strategist, believes that this is only half the story.

Owens points out that many homeowners who locked in low mortgage rates during the pandemic are now choosing to upgrade their current homes rather than move due to high mortgage rates. This has led to an increase in renovation spending, which reached $517 billion in the second quarter of 2026, up 2% year-over-year.

The two main drivers of Home Depot's upside are the growing demand for renovations and homeowners' use of home-equity lines of credit (HELOCs) to finance these projects. The national HELOC balance rose by $13 billion in the second quarter, reaching a total of $459 billion. Additionally, American homes are aging, with an average age of 44 years, requiring repairs and replacements, such as new roofs and pipes.

Owens also highlights Home Depot's dividend growth, which has increased 238% over the last decade. The current yield is nearly triple that of the typical S&P 500 stock, and the company's dividend growth creates a 'dividend magnet' effect on the share price.