Home Depot’s own commentary gives a real mechanism linking mortgage rates to its business. When fewer people buy and sell homes, fewer of the projects and purchases that tend to follow a move get made. What the company’s disclosures do not show is how large that effect would be, when a rate decline would produce it, or whether Home Depot’s share price already reflects a recovery. The “sleeping giant” idea is therefore an investment thesis to test, not a finding.
How the mechanism works
Management has linked the company’s exposure to the housing market through transaction volume rather than through home prices or construction alone. On the fourth-quarter 2025 earnings call, the company’s management said:
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“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.”
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The same call tied affordability to the rate environment:
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“The current mortgage rate environment and significant increase in home prices since 2019 have impacted housing affordability.”
Read together, these statements describe a chain: higher rates and higher prices reduce affordability, affordability reduces moves, and fewer moves reduce demand for the work and goods that accompany a sale. Management attributes the link to its own business. The company’s materials do not provide an independent measurement of how strong that chain is.
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The mortgage lock-in figures, and why their date matters
An investor conference presentation from 2025 described a “mortgage lock-in effect.” It said that approximately 80% of outstanding mortgages carried interest rates below the then-current 30-year mortgage rate of approximately 6.3%. The logic is straightforward: a homeowner with a low existing rate has little reason to sell and take on a new loan at a higher rate, so turnover falls.
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What the company forecasts for fiscal 2026
Home Depot’s fiscal 2025 results give the baseline: $164.7 billion in net sales and $14.2 billion in net earnings, as reported in its 2026 annual report. The company’s outlook for fiscal 2026, issued with its fourth-quarter and full-year fiscal 2025 earnings release, is set out below. Each figure is a management forecast measured against fiscal 2025, not a realized result or an independent analyst estimate.
| Metric | Fiscal 2026 company guidance | Source |
|---|---|---|
| Total sales growth | Approximately 2.5% to 4.5% | Fourth-quarter 2025 earnings release and earnings call |
| Comparable sales | Approximately flat to up 2% | Fourth-quarter 2025 earnings release and earnings call |
| Adjusted diluted earnings per share | Approximately flat to up 4% | Fourth-quarter 2025 earnings release and earnings call |
This is a modest outlook. It does not break out how much of the growth, if any, depends on a housing-turnover recovery, so it cannot be used to size the thesis directly.
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Two scenarios to compare
The thesis depends on which of two broad paths the housing market takes. The table compares them on the variables the company’s disclosures actually address.
| Variable | Recovery scenario | Slow-recovery scenario |
|---|---|---|
| Mortgage rates and affordability | Rates and affordability improve; the size of improvement needed is not quantified in the company’s materials | Rates and affordability stay constrained, as management described on its recent calls |
| Housing turnover | Rises from the historical lows management described | Remains at or near those lows |
| Demand for move-related projects and purchases | Increases in step with more transactions; magnitude not stated | Stays constrained; demand relies more on the broader business and on work not tied to a move |
| Comparable sales and total sales | Could run above the fiscal 2026 guidance range; no company estimate given | Tracks the modest guidance range or below it; no company estimate given for the downside |
| Timing | Not stated in the company’s materials | Not stated in the company’s materials |
The most useful test is whether reported results move with the turnover variables. If comparable sales improve while housing turnover stays low, the thesis is weakened, because the sales gain would be coming from somewhere else.
What is not established
- Current valuation and expectations. This article does not establish Home Depot’s current share price, valuation multiple, peer valuation, or consensus estimates. Whether the stock is cheap, fully priced, or discounting a recovery cannot be determined from the company’s disclosures alone.
- Timing and size of a rate catalyst. Management describes how housing turnover affects demand, but its materials do not forecast a rate path or quantify how much a decline would lift turnover, sales, or earnings.
- Independent confirmation. The evidence here is company reporting and a company investor presentation. The causal link rests on management’s own account; no independent housing-market statistic is cited to corroborate it.
Risks that rates alone do not explain
The company’s annual report for fiscal 2025 cites persistent high interest rates as a pressure on home-improvement demand. Home Depot’s 2026 proxy statement also discusses broader macroeconomic uncertainty as a demand risk. Both point to factors beyond mortgage rates. A thesis that treats lower rates as the single switch for Home Depot’s results overstates what the company itself describes.
Signals that would change the picture
- Published mortgage-rate and affordability data. Look for a sustained decline from dated, primary-source series rather than a single move.
- Management’s turnover language. A shift from “historical lows” to a description of rising transactions in later earnings calls would support the recovery path.
- Comparable sales against the guidance range. Results above the approximately flat to up 2% range would be the first sign that the outlook is too conservative; results below it would support the slow-recovery path.
- Guidance revisions. Any change to the fiscal 2026 sales, comparable-sales, or earnings-per-share ranges shows how management now expects the housing channel to behave.
Until these signals appear in company reporting, the “waiting on mortgage rates” framing describes a plausible sensitivity, not a demonstrated catalyst.
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