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While I am still awaiting my Nobel Prize for the Microwave Oven Rule of Behavior, I am now ready to submit my second soon to be award winning theory called the Consolation Prize Theory.

Conventional wisdom has it that the large decline in luxury home sales will lead to an equally large decline in luxury goods sales. While this may be true for the kind of items that come with a home when you buy it (cabinets, counters, perhaps refrigerators, washing machines and ovens), I think Wall Street is missing the boat on this one.

When a rich person buys a luxury home they are planning to spend perhaps $100K on moving, lawyers, closing costs, decorators etc... They are also planning on taking a 6% hit on the sale of their existing home and probably have to come up with an extra $100K to make a deposit on the new home as well.

So I'm planning on leaving my $1M home that I have $400K of equity in with a $5K per month mortgage to move into a $1.5M home I will have $300K of equity in and a $10K mortgage and the move will cost me about $150K of cash when all is said and done.

Now, the economy didn't hit me but home prices are a little ridiculous and I'm only being offered $900K for my home (I know, contrary logic, but you always think you are overpaying for the home you want and being ripped off on the home you're selling) and the rates are much higher than when I started looking so I decide not to move.

I find myself with $250,000 in the bank that was set aside for "home stuff" and a pretty disappointed wife. I'm a little disappointed myself so I go pick up that HDTV that I was planning on getting for the new living room as a consolation prize which my wife takes as a go-ahead signal to remodel the kitchen and at least 2 bathrooms, replace some carpeting, paint, buy a new couch and order a hot tub (believe me, this is what happens!).

What hurt Home Depot's Expo centers the past few years is the fact that people buying new homes (pretty much everyone was) aren't really looking to remodel. All that is about to change as long as the economy doesn't really collapse.

So let's have some suggestions for companies that will benefit from luxury home remodeling. Be careful to avoid ones like coriander counter makers, as their biggest clients are builders. Think of things that don't come with luxury homes but get added at some point!

Source: The Consolation Prize Theory: Why Home Depot Should Profit From the Housing Slowdown