The S&P 500 is at fresh highs while a giant chunk of the real economy sits in a deep freeze. On a recent episode of The Compound and Friends, Michael Batnick and Josh Brown spent a segment unpacking why housing-adjacent stocks have collapsed even as home prices across major metros stay stable. The distinction matters: this is a transaction volume problem, with home prices in major metros holding steady.
“The fact that the economy has been as resilient as it is, the fact that the stock market and spending has been what it is, despite the fact that one of the actual largest parts of the economy is in a depression… is remarkable,” Batnick said. Brown framed the supplier pain directly: “These companies that are suppliers to the housing market, they need turnover. They need more buying and selling.”
University of Michigan consumer sentiment sits at 53.3, recessionary territory, while the 10-year Treasury yield is back to 4.4%, keeping mortgage rates punishing. Meanwhile, SPY is up 27% over the past year.
The damage, stock by stock
Whirlpool (NYSE:WHR | WHR Price Prediction) is the poster child. Down 81% over five years, the appliance maker just reported a 9.6% revenue decline and North America EBIT cratering 96% to $6 million. CEO Marc Bitzer called it “recession-level industry decline,” and the company suspended its dividend to focus on over $900 million in debt reduction. See the Q1 release.
Lennar (NYSE:LEN) fell from $185 in summer 2024 to $85. Q1 revenue was $6.62 billion, down 13% year over year, with gross margin on home sales collapsing to 15.2% from 18.7%. CEO Stuart Miller pointed to “high mortgage rates, constrained affordability, cautious consumer sentiment, and geopolitical uncertainty.”
Pool Corporation (NASDAQ:POOL), down 55%, actually beat in Q1, with EPS of $1.45 versus $1.35 expected. Maintenance demand holds up. Discretionary new-pool installs, which require home turnover, do not.
Zillow Group (NASDAQ:Z) crashed from $90 to $39 despite a clever pivot. Rentals revenue grew 42% to $183 million and multifamily jumped 57%, but listings clicks depend on people moving.
Home Depot (NYSE:HD) is the most resilient of the bunch, down only 15% over the past year. Ted Decker said “consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand.”
Value setup or value trap
You’d want to own this group if you believe existing home sales volume unfreezes as mortgage rates drift lower. You’d avoid it if you think transactions stay frozen through 2027. Watch the 10-year yield and turnover data. Until Americans start moving again, the suppliers stay stuck, no matter what the S&P 500 does.
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