Home Depot sends its strongest warning yet on the housing market

Across the country, homeowners are renovating rather than moving.

Those who locked in mortgage rates a few years back have done the math: selling means financing at today’s rates, and that can add hundreds of dollars a month to housing costs. Most have decided it is not worth it.

The house they are in is the one they intend to keep.

Home Depot (HD) CFO Richard McPhail put a name to it on the company’s most recent earnings call. Housing turnover has “never been lower as a percentage of the housing stock,” McPhail said. He called it “frozen housing market conditions.”

The 30-year fixed rate stood at 7.24% the week of Oct. 29, per Freddie Mac. For anyone sitting on a 3% mortgage from 2020, that number explains the freeze entirely.

Also read: Something shifted in the housing market, and sellers felt it first

For retirees who have made peace with staying put, the natural next step is to fix things. A kitchen. A bathroom. Work that makes the house feel worth staying in.

What most of them do not think through is what a large 401(k) withdrawal to cover that renovation does to Medicare premiums two years down the road.

What the housing freeze means for how retirees spend on their homes

When home sales slow to a crawl, the spending that normally follows a purchase dries up with them. New owners buy appliances, flooring, light fixtures, and paint. That category of demand is weak right now, and Home Depot has been saying so for several quarters.

McPhail’s latest description was the company’s sharpest framing yet.

Long-term homeowners are filling some of that gap with renovation projects. Comparable sales still grew in Home Depot’s most recent quarter. People who have decided to stay are spending to make staying worth it.

For retirees in that position, a $50,000 kitchen overhaul or a bathroom renovation is a reasonable way to invest in a house they plan to be in for a long time. How they fund it is a decision most have not fully thought through, and the Medicare angle is almost always the piece that catches them off guard.

For retirees who have made peace with staying put, the natural next step is to fix things

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The Medicare surcharge that follows a large 401(k) withdrawal

Medicare does not calculate premiums off current-year income. It looks back two years. A large 401(k) distribution taken in 2026 affects what a retiree pays for Medicare in 2028, well after the renovation is finished and largely forgotten.

Medicare calls it IRMAA, the income-related monthly adjustment amount. The charge kicks in when modified adjusted gross income passes certain thresholds.

For a single filer in 2026, the first one lands at $109,000. Standard Part B costs $202.90 a month. Clear that number and Part B goes to $284.10, with another $14.50 a month on Part D.

A retiree bringing in $80,000 a year takes $50,000 from a pretax 401(k) to redo her kitchen. Modified adjusted gross income for the year hits $130,000, which is $21,000 past the IRMAA threshold. Add up the Part B and Part D surcharges across the year and she has paid $1,148 in added Medicare premiums because of a home project from two years earlier.

The same $50,000 renovation funded with two $25,000 withdrawals a year apart keeps her income at $105,000 in each of those years. Under the threshold. No surcharge. Same kitchen, different bill.

Ways to fund a renovation without triggering a higher Medicare bill

Money pulled from a savings account is not taxable income and does not register in modified adjusted gross income. No IRMAA exposure.

Roth IRA funds behave the same way for retirees past 59 and a half who have held the account at least five years. Those withdrawals clear the account tax-free with no income impact.

The drawback is that Roth money is usually the most tax-efficient asset in a retirement portfolio. Many retirees who spend it on renovations find five years later they wish they had left it alone.

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Borrowed money is not income. Home equity loans and lines of credit do not raise modified adjusted gross income. At 7.24% on the 30-year fixed, a $50,000 home equity loan generates roughly $3,600 in annual interest. Real money, though for many retirees still cheaper than two years of IRMAA surcharges.

Keeping savings and Roth funds intact is possible if the renovation timeline can flex. Splitting 401(k) distributions across two tax years, with Dec. 31 as the dividing line, holds modified adjusted gross income under $109,000 in both. The only real variable is scheduling the work around that cutoff.

What to check before you request the distribution

Before any distribution request goes in, pull last year’s Form 1040. Add line 11 and line 2a, then factor in the planned withdrawal. If that total clears $109,000 as a single filer, Medicare is adding a surcharge two years from now. Most retirees never run this number before calling their plan administrator.

Not all 401(k) plans allow partial distributions. Some older designs restrict how withdrawals can be structured. If the plan does not allow them, the staged approach is off the table regardless of how the renovation is scheduled.

Form SSA-44 is Medicare’s surcharge appeal form. It covers genuine life disruptions: job loss, divorce, the death of a spouse.

A decision to renovate a kitchen does not meet the standard, and the SSA will say so quickly. The IRMAA that follows a voluntary 401(k) withdrawal sticks for the two years it covers. There is no mechanism to dispute it once the distribution has gone through.

Related: Goldman Sachs has a new warning for the housing market for 2027

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