(RTTNews) -  The world's largest home improvement retailer and Dow component Home Depot, Inc. (HD: News ) is scheduled to release financial results for the second quarter before the market opens on Tuesday. The company is expected to reveal a decline in profit and revenues as it continues to struggle with lower demand amid the recession and housing market downturn. The company's problems have been compounded by tighter credit markets as banks are reluctant to offer new home loans to customers.

Home improvement stores have been hurt along with home builders and other real estate linked industries as the pace of home sales dropped off in the recession. However, recent data showing a jump in pending home sales and mixed earnings from home builders have revived hopes that the worst of the housing crisis is over.

The U.S. housing market is showing signs of life for the first time since 2006. According to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development late last month, sales of new one-family houses in the U.S. rose for the third straight month in June to a seasonally adjusted annual rate of 384,000 units, up about 11%, the biggest increase in eight years. Housing starts also rose to a seven-month high in June.

Further, the declining home prices, historically low interest rates and government stimulus programs, such as the $8,000 federal tax credit for first-time home buyers and the $10,000 California state tax credit has created unique home purchasing opportunities. Though job market weakness and tight mortgage lending standards continue to restrain demand, yet consumer confidence appears to be growing.
Several reports to be released this week are expected to show an improvement in the housing market, including data on July housing starts, which is due out today, as well as information on July existing-home sales to be released on Friday. According to the latest reading released by the National Association of Home Builders/Wells Fargo Housing Market Index on Monday, builder confidence in the market for newly built, single-family homes improved one point in August to 18, its highest level since June 2008, building on a two-point gain in July, with the July reading being 17.

Like many other companies dependent on the housing sector, Home Depot is also impacted by the credit crisis and the tough economic conditions that have seen customers turning away from discretionary spending and shelving home improvement projects as well as big ticket projects.

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