Home Depot shares closed Wednesday 6.5% higher after Tuesday’s Democratic sweep of Congress. Lowe’s gained 7.5%, while the SPDR S&P Homebuilders ETF managed by State Street rose 5.4% to its strongest level in more than two months.
The rally is running ahead of the policy. Democrats have not yet put forward detailed housing proposals, and lower mortgage rates have not arrived.
What investors are buying
Housing stocks have spent two years coping with expensive mortgages and sluggish turnover. The election gave investors a reason to expect a change. Hakeem Jeffries, the expected incoming House speaker, said affordability dominated the vote and that reducing housing costs should rank high on the new majority’s agenda.
TD Cowen pointed to Rep. Maxine Waters, who could lead the House Financial Services Committee. Waters intends to address housing, including assistance with down payments. The firm’s analysts nevertheless said they “remain dubious it will become law.”
There was movement in bond markets. The 10-year Treasury yield slipped 1.2% on Wednesday to close at 4.89%. That can feed expectations of cheaper borrowing, although actual mortgage costs and any congressional programme will take longer to develop.
The operating numbers are less exuberant
Home Depot’s comparable sales increased just 0.3% in fiscal 2025, which ended Feb. 1, 2026, following two years of declines. Management says costs begin to leverage when comparable sales reach about 3%. Its current guidance is flat to 2%.
Normalized earnings per share are expected to grow about 2% in the fiscal year ending January, with quicker growth forecast afterward. An election alone does not alter those estimates. More housing transactions could.
Valuation has already moved. Home Depot traded at 22x forward earnings before the rally, matching its five-year average. At Wednesday’s price, the multiple was about 24x, even though earnings had declined for two consecutive years.
Lowe’s faces a similar test. During the quarter ending July 31, comparable sales edged up only 0.2% as DIY customers pulled back; its full-year comparable-sales forecast is flat.
Builders still need rate relief
D.R. Horton reported a 7% drop in net sales orders for the quarter ended Sept. 30. Executive Chairman David Auld said, “We expect incentives to remain elevated in fiscal 2027.”
For the quarter ending Aug. 31, Lennar’s incentives absorbed about 12.0% of its average sale price. Its home-sales gross margin dropped from 17.5% in the prior-year period to 15.8%. Lower yields could reduce what builders must spend to attract buyers.
For Home Depot, the next dated checkpoint is its third-quarter report on Nov. 17, with U.S. comparable sales the central measure. Its Black Friday promotion began Nov. 4 and runs through December 2, giving the retailer a separate read on customer demand before the new Congress turns housing expectations into legislation.
Sources
- Here’s What Democrats Taking Back the House and Senate Could Mean for Housing Stocks Like Home Depot and Lowe’s | The Motley Fool
- Home Depot
- Home Depot Is Selling a Bunch of Milwaukee Tools Way Below Retail | Gear Patrol
- Home Depot Is Giving Away Free Milwaukee Tools During Its Tool Savings Event
- Home Depot Soars 7% as Housing Stocks Rally on Midterm Election Results
- Home Depot's Black Friday sale is live now: Our favorite deals – ZDNET
Photo: Harrison Keely (CC BY 4.0)
