Wolfe Research downgrades Home Depot, cites housing market pressure

Wolfe Research cut Home Depot from Outperform to Peer Perform, saying the home-improvement chain is facing a housing market that remains stuck by mortgage-rate lock-in, rising rate risks and questions about how much profit its Pro push will ultimately generate. The call also put the wider home-improvement sector on Peer Perform, with analyst Spencer Hanus saying Wolfe still prefers Lowe’s for more idiosyncratic upside.

The downgrade landed after Home Depot’s first-quarter fiscal 2026 report on May 19, when the company posted sales of $41.8 billion, up 4.8% from a year earlier. Comparable sales rose 0.6% overall and 0.4% in the U.S., while adjusted diluted earnings per share came in at $3.43. Home Depot reaffirmed its fiscal 2026 guidance, a sign that management is not signaling a break in demand even as the stock market is pressing on the company’s housing exposure.

Ted Decker said the company’s underlying demand was relatively similar to fiscal 2025, even with greater consumer uncertainty and housing affordability pressure. That distinction matters inside stores, where the slowdown is not a broad collapse in traffic so much as a harder environment for bigger-ticket projects that depend on homeowners moving, refinancing or taking on large remodels. When those jobs slow, the pressure shows up first in categories tied to kitchens, baths, roofing and other higher-dollar purchases that drive sales through the Pro desk.

Hanus pointed to the mortgage-rate lock-in effect as a central concern, since homeowners who locked in lower borrowing costs are less likely to move and restart the cycle of repairs and renovations. He also flagged the possibility that Home Depot’s large Pro-focused acquisitions could dilute return on invested capital, a sharper worry now that the company has expanded its reach through SRS Distribution and GMS Inc. Home Depot completed its roughly $18.25 billion acquisition of SRS Distribution on June 18, 2024, and later completed SRS’s $5.5 billion acquisition of GMS on September 4, 2025.

For associates and managers, the market’s debate is less about whether Home Depot can still sell and more about what kind of demand is likely to dominate the next stretch. Wall Street is weighing softer big-ticket remodeling, margin pressure, competition and broader housing caution, while the company is still saying underlying demand has held close to fiscal 2025. Wolfe’s move suggests investors are waiting for clearer signs that Home Depot’s Pro growth can outrun the housing market’s drag.