Shares of Home Depot are up 4% and I've been listening to the conference call to get a sense of what's happening in US housing, which is an area where the bulls and bears have widely-divergent views.

Lately, the bears have been louder, warning that higher interest rates will sap demand and that consumers will stop spending on renos.

Home Depot executives haven't seen that at all, and raised guidance for the year.

CEO Craig Menear said:

"We believe that the medium to longer term underpinnings of demand for home improvement have never been stronger" and..."while we don't know how inflation might impact consumer behavior going forward, we are closely monitoring elasticities and customer trends across our respective categories and geographies and remain encouraged by the underlying strength we see in the business"

  • Cited strong demand for home improvement projects
  • We're encouraged by demand from our pros and they tell us that backlogs are strong
  • Big ticket transactions up 12.4% y/y
  • April comps -2.9% y/y in the US but the company blamed a late spring in all geographies. Mexico and Canada posted comps above the company average.
  • Expects comps to be stronger in the second half of the year.
  • "The consumer is very engaged, the pro is very strong and the results came despite a delayed spring." The fundamentals for home improvement remain incredibly supportive.
  • "Our customers are resilient, we're not seeing the sensitivity to inflation that we expected"
  • We're not seeing a big shift out of home improvement. Intentions to repair and remodel remain at the highest that we've tracked.
  • Our Canadian business is in terrific shape.
  • "We expect a pickup in Q2 in particular in lumber activity"
  • We have a chronic shortage of housing units in the US for the past 10 years. Suggests 2-4 million units. "We're looking at at least 5 years, if not 7 years to get back equilibrium. Chronic undersupply is going to be a condition for quite some time."

At the top of the hour, we'll hear from home builders via the NAHB housing index. The consensus is 75 vs 77 previously.

Home builders are one of the worst-performing sectors in the S&P 500 this year. Either home builders and HD are going to be wrong or the market is. Here's the XHB ETF:

XHB housing