This segment is headed for a third straight year of decline amid a depressed housing market and a recessionary economy in which consumers are sticking to the essentials. “Consumers are not spending as much on home remodeling, with new and existing home sales at record lows and home prices continuing to plummet,” says Robert Rulla of the Fitch Ratings agency. “In addition, with the credit markets still tight, the prospects for home improvement spending, at least through 2009, remain challenging.”

The Leading Indicator of Remodeling Activity from Harvard University’s Joint Center for Housing Studies shows homeowners will spend about 12 percent less on remodeling in 2009 than they did last year, which was already 9.7 percent lower than 2007.

Still, the leaders in this segment refuse to see the glass as half empty. Although Home Depot eliminated 7,000 jobs and shuttered the entire Expo Design Center chain over the past year, CEO Frank Blake offered a positive forecast in June. Lowe’s raised earnings projections and reported that it had gained market share over the last five quarters. While it is scaling back domestic expansion, Lowe’s is still moving ahead in the international arena, opening stores in Canada and planning to cut the ribbon on its first two units in Mexico in January 2010.