A record wave of U.S. consumer spending on home improvement should give a big boost to the sales and earnings of, among others, the two giants of the home improvement business: The Home Depot Inc. (HD) and Lowe's Companies Inc. (LOW), according to the Wall Street Journal.

Record Spending

The Harvard University Joint Center for Housing Studies projects that U.S. consumers will spend a record $316 billion on remodeling their homes this year, up from $296 billion in 2016 and far above the recent low of $222 billion in 2009, the Journal says. A major reason is that a shortage of new single family homes is driving up prices, and those who can't afford to trade up are putting money into renovations of their existing dwellings. 

The result is that contractors and home improvement suppliers such as Home Depot and Lowe's are seeing increased revenues and profits - even as other retailers are under assault from online rivals such as Amazon.com Inc. 

Surging Profits

Home Depot is expected to post full year 2017 EPS of $7.24, up 12.2% from $6.45 in 2016, per data from FactSet Research Systems Inc. (FDS) cited by the Journal. For Lowe's, the anticipated EPS increase based on analysts' consensus is 15.8%, rising from $3.99 in 2016 to $4.62 in 2017, also per the Journal.

The home improvement boom is also fueling sales of home appliances, a category where Home Depot and Lowe's are leading retailers. Shares of electronics and appliance retailer Best Buy Co. Inc. (BBY) are also being fueled by the record spending. They are up 32% year-to-date through Wednesday, with increased appliance sales a key driver, according to The Motley Fool. Best Buy, facing relentless attacks from online retailers, is benefiting less than Home Depot and Lowe's. It is expected to post slower full-year EPS growth of 8.7% in fiscal 2017 and 7.0% in fiscal 2018, per data from Zacks Investment Research reported by Nasdaq.

The outlook is more buoyant for home appliance manufacturer Whirlpool Corp. (WHR). The company's annual EPS growth rates for 2017 and 2018 are projected to be 31.5% and 15.9%, respectively, per the same sources.

All four of these companies recently suffered hits to their stock prices after Amazon.com announced that it would begin to sell Kenmore brand appliances. (For more, see also: Home Depot, Lowe's Seen Oversold on Amazon Attack.)

Tight Housing Inventory

A striking fact is driving the home improvement wave: the number of houses for sale in the U.S. today is about the same as 23 years ago, in 1994. But the U.S. population has grown by roughly 64 million since then, per figures shared with the Journal by Svenja Gudell, chief economist at real estate listing service Zillow Inc. The tight inventory was a factor in the 1.8% decline from May to June in sales of existing homes, per data from the National Association of Realtors cited by the Journal. Meanwhile, home prices have risen by an average of 5.6% in the 12 months through May, using the S&P CoreLogic Case-Shiller U.S. National Home Price Index. From its bottom in February 2012, the index is up 42.2%, per S&P Dow Jones Indices. 

That bad news for house-hunting U.S. consumers is turning into a shot in the arm for home improvement retailers.