A projected slowdown in the housing market by mid-2026 may dampen consumer demand for home interiors, affecting key players in the home improvement and furniture retail sectors. Stocks like HOM, LOW, RYI, and HD could face margin pressures amid reduced renovation and new construction activity.
- Projected 12% decline in new housing starts by 2026
- Average 30-year mortgage rate expected to reach 7.2% by Q2 2026
- Home Depot (HD) same-store sales growth slowed to 1.2% in Q3 2025
- RYI reported a 6% drop in comparable sales in Q2 2025
- NAHB builder confidence index forecast to fall 22% YoY by late 2025
- Interior-focused retailers may face reduced demand and margin pressure
The residential real estate sector is expected to face persistent challenges in 2026, with rising mortgage rates and constrained inventory creating headwinds that could ripple into the interiors and home improvement industries. Analysts project a 12% decline in new housing starts compared to 2024 levels, driven by affordability constraints and a 7.2% average 30-year fixed mortgage rate anticipated by Q2 2026. This slowdown is likely to reduce both new construction and renovation spending, which directly impacts demand for interior products and services. The interiors sector, which includes furniture, fixtures, and home accessories, is particularly vulnerable. Historically, consumer spending on home upgrades has dropped by an average of 18% during housing downturns. With the National Association of Home Builders (NAHB) index projecting a 22% year-over-year decline in builder confidence by late 2025, the trajectory points to weaker demand for interior goods in the following year. Companies such as Home Depot (HD), Lowe’s (LOW), and RH (RYI), which derive significant revenue from home improvement and furnishings, may see reduced foot traffic and lower sales volumes. Stock performance for home-focused retailers is already showing early signs of strain. HD’s same-store sales growth has decelerated to 1.2% in Q3 2025, down from 4.8% in the same period last year. Similarly, RYI reported a 6% drop in comparable sales in its North American segment during Q2 2025, partly due to reduced project activity in high-end residential markets. These trends suggest that consumer spending on interior upgrades may remain subdued through 2026 unless policy measures ease affordability hurdles. The implications stretch beyond retail. Suppliers of building materials and cabinetry, including smaller manufacturers and distributors, could face inventory overhang and margin compression. Investors in the consumer discretionary and real estate sectors should monitor housing metrics closely, as early indicators suggest a potential shift in discretionary spending patterns. A sustained downturn in housing could trigger broader economic ripple effects, particularly in labor-intensive construction and interior design services.