As the home improvement retailer’s earnings report revealed, there are fewer Home Depot shoppers now than when the pandemic first began. However, that shouldn’t necessarily spark concern about the housing market.

Last week, there were reports about Home Depot’s earnings being less than estimated in the second quarter. Fewer shoppers is naturally lending itself to a lot of speculation about whether or not the housing industry is experiencing a slowdown, with CNN reporting a bigger-than-expected drop for retail sales in July as well, according to the Census Bureau.

Although Home Depot’s second-quarter revenue and earnings topped forecasts last Tuesday, when the report was released, a couple statistics really sparked investor concern.

For example, same-store sales growth — which measures the performance of U.S. locations that have been operating for at least a year — rose just 3.4 percent. That’s a notable decline from the first quarter, and as CNN wrote, it falls below analysts’ estimates. Sounds like maybe a cause for concern, right?

Not exactly. There are many factors at play here, and headlines proclaiming this is a sign of a weakening housing market are misleading — if not downright salacious clickbait. 

For one, as far as coming out of COVID-19, we started to see a shift in how people were living in the middle of the second quarter. What’s more, this ties into seasonality, as we are now seeing the market drop off.

To put it bluntly: The housing market didn’t have seasonality for 18 months, and now, we are seeing a return to normal. 

Every single August prior to the pandemic, we typically saw prices decrease, and that’s what we’re seeing this August, too. We’ve just forgotten that seasonality is normal and something to be expected. 

People were working on houses during the pandemic because there wasn’t much else to do when lockdowns were in full bloom. But as with anything else, there was a point where people were psychologically, mentally and physically “done” so to speak with being in their homes. 

Basically, we’ve had 18 months of Home Depot going bananas in the market. The slowdown we’re starting to see right now is expected. 

Seasonally speaking, Home Depot would eventually have to bounce back into more normal earnings, and the market is doing the same right now, which is common this time of year.

Put it this way: If we relate Home Depot’s earnings and revenue to the increase in travel, my bet is that they’ll line up. People are ready to travel — and have been for quite some time.

Look at RV sales in this country. According to forecasts prepared by ITR Economics for the RV Industry Association, total RV shipments in 2021 would represent a 33.8 percent increase over the 2020 year-end total. 

We saw the travel industry pick up in March and April too, with an overload in May, and then normalize in June and July as the delta variant began to provoke fear and concern again. 

At the end of the day, this is apples to apples: Look at where people are. The housing market is, for lack of a better word, “weird” right now, but Home Depot’s earnings don’t prove anything. We’re in a normalized market, and if we relate it to August of 2018, the numbers are similar in terms of increase in inventory.

What we’ve forgotten is seasonality. We forget after fighting a pandemic for 18 months that this happens. It used to be that people waited to do their projects in the summer, but now everyone wants to get out of here and see the world while they can (and potentially before this delta variant forces more lockdowns).

Home Depot’s earnings are simply separate from the housing market. The fact of the matter is that even if demand picks up a little bit, we’ll see a giant jump in buyer demand and lack of inventory continue nationwide. Inventory is at historic lows, and that’s not changing anytime soon. 

Bret Weinstein is the CEO and founder of BSW Real Estate in Denver. Connect with him over Facebook or Instagram

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