UBS slams the stocks of Home Depot and Lowe's

Oh, the horrors -- the housing boom has finally wound down and the real estate downturn has affected the stocks of large national homebuilders. It seems logical that a major financial analyst house was waiting in the wings to downgrade the two largest home-improvement chains, The Home Depot , Inc. (NYSE:HD) and Lowe's Companies, Inc.(NYSE:LOW). That's precisely what happened when UBS downgraded both companies from "Neutral 1" to "Reduce 1" in terms of holding positions for both equities.

So, with all those housing starts not happening at the rapid clip that saw homeowners trying to buy properties and flip them for profits just recently, this slowdown -- that some have even predicted will cause a recession -- will soon affect the short-term outlook for both home-improvement chains as people don't line up to furnish their homes.

I have to question that logic a little though -- newer homes generally don't need anything new ... because they're new. Existing and older homes that need renovation like new floors, windows, doors, carpet and fixtures like sinks and vanities are where much of the business at both Home Depot and Lowe's is these days. On the other hand, new builders that are seeing slowdowns have commercial buying contracts with both companies and that business is likely to slow, and I'm sure it is already. So, in that respect, new construction slowdowns will chomp into the sales and resultant profits of both companies shortly.