Paint and Wallpaper Stores NAICS 444120

Sep 26, 2025 - Fed Rate Cuts Could Boost Home Improvement Demand

• Industry observers suggest that lower interest rates and record homeowner equity could spur a rebound in remodeling spending. The Federal Reserve cut its benchmark overnight interest rate from 4.25% to 4.0% on September 18 amid a tepid labor market, and the central bank is expected to announce more cuts before the end of the year, according to Reuters. Home centers and hardware stores could see an uptick in demand if lower interest rates for home equity lines of credit and mortgages, key channels for home-improvement financing, prompt homeowners to move ahead with projects. In its second-quarter report to investors, Home Depot said some customers hesitated to move forward with big-ticket improvements.
• Sales of existing US homes decreased by 0.2% in August from July but were up 1.8% year-over-year, according to the National Association of Realtors (NAR). NAR chief economist Lawrence Yun said, "Home sales have been sluggish over the past few years due to elevated mortgage rates and limited inventory. However, mortgage rates are declining and more inventory is coming to the market, which should boost sales in the coming months." Existing home sales are an important driver of paint and wallpaper store sales, as sellers often freshen paint before putting homes on the market, and buyers make improvements before moving in.

• Single-family housing starts fell 7% month-over-month and decreased 11.7% year-over-year in August. The number of building permits issued for single-family, privately-owned housing units dropped 2.2% month-over-month and fell 11.5% year-over-year in July 2025. With just 890,000 single-family homes breaking ground, August marked the lowest activity since April 2023. Builders may be slowing production amid a mounting oversupply of new homes on the market, according to Reuters. The Federal Reserve cut its benchmark overnight interest rate from 4.25% to 4.0% on September 18 amid a tepid labor market, and the central bank is expected to announce more cuts before the end of the year. In anticipation of the Fed rate cut, mortgage rates moved lower earlier in September. Industry insiders hope rate cuts will ease a prolonged housing slump.
• Home remodeling spending growth is expected to remain flat in 2025 and the first half of 2026, according to the Leading Indicator of Remodeling Activity (LIRA) report by the Joint Center for Housing Studies at Harvard. Homeowner improvements and repairs are expected to increase 2% to $509 billion in the third quarter of 2025 compared to Q3 2024. In the fourth quarter of 2025, remodeling spending will rise quarter-over-quarter to $511 billion, up 1.8% from Q4 2024. Spending will increase to $524 billion in Q1 2026, up 2.2% from Q1 2025. In the second quarter of 2026, year-over-year spending is forecast to rise 1.2% to $518 billion. Joint Center expects a weak housing market to put downward pressure on remodeling spending. However, recent federal cuts to incentives for efficiency improvements may spur short-term growth as homeowners make upgrades before benefits expire at the end of the year.