Home Depot says consumers are feeling crummy about the economy, and they’re dishing out less on major home renovation projects.

The home improvement giant, a bellwether of consumer spending and the housing market, lowered its sales expectations for the year. It said customers were spending less on home improvement projects, pressured by higher interest rates and concerns that the economy is getting worse.

Home Depot’s business is closely tied to the housing market, and high interest rates are putting a brake on housing turnover and consumers financing larger projects.

“During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects,” Ted Decker, Home Depot’s CEO, said in a news release.

Home Depot’s sales at stores open at least a year dropped 3.6% last quarter, the company said Tuesday. It expects sales at stores open at least 12 months to fall between 3% and 4% this year compared to last year. That’s down from its earlier estimate that sales would fall about 1% by that measure.

Consumer demand for home improvement has been slumping for about a year, and the company said the story hasn’t changed much. Still, Decker remained optimistic, saying “The underlying long-term fundamentals supporting home improvement demand are strong.”

Home Depot’s (HD) stock fell less than 1% Tuesday.

The company’s sales boomed during the height of the pandemic as millions of people spending more time at home turned to renovations and other home improvement projects. But many consumers have since shifted from purchasing physical goods to experiences, such as travel and concerts; others have just cut back spending in general. This shift has hurt Home Depot. McDonald’s, Starbucks, Disney and other consumer brands have also noted a consumer pullback.

Home Depot executives said on an earnings call that consumers were healthy, but they were taking on fewer large projects. That led to sluggish sales for building materials, lumber and construction-related equipment.

Home prices are sky-high nationwide and demand for housing still overwhelms supply in most markets.

The median price of a previously owned home in the United States rose to $426,900 in June, up 4.1% from a year earlier, according to the latest data from the National Association of Realtors.

However, mortgage rates have steadily fallen over the past several weeks since reaching a 2024 peak of 7.22% in early May. Rates are down from a two-decade high seen late last year.

Home Depot made its largest acquisition ever this year, spending $18.3 billion to buy SRS Distribution, a huge building-projects supplier that counts professional roofers, landscapers and pool contractors as its primary customers.

The company currently gets around half of its sales from housing professionals, who spend more at stores than do-it-yourself homeowners purchasing lawn mowers and power tools. Both Home Depot and Lowe’s have been trying to win more pro customers.