Home Depot hit by house slowdown

US households appear to be spending less on DIY

Home Depot, the US DIY store chain, has blamed the slowdown in the US housing market for its second profit warning in two months.

The company now expects its 2007 profits to fall by between 15% and 18%, after saying in May that the drop would probably be about 9% this year.

The number of new homes being built in the US is now near a 10-year low, while repossessions are at a record high.

Home Depot said it saw weakness in the sector continuing into 2008.

'People aren't spending'

The US housing market has been hit by rising interest rates and prices falling back, after a steep rise in recent years.

"Housing turnover continues to slow and prices continue to come down," said Keith Davis, an analyst with Farr Miller Washington.

"People aren't spending the way they had been on home improvements."

Fellow retail analyst Bill Schultz of McQueen, Ball & Associates said the Home Depot warning "really shows how deep this housing downturn is".