Many were surprised when they heard that Home Depot was closing all 34 of its Expo Home Design Centers, but if you are a regular reader of its financial reports, you certainly would have seen signs of major financial stress. Home Depot (NYSE: HD) first discussed a "store rationalization plan" in its first quarter of 2008 report. At that point, it closed 15 stores and removed about 50 stores from the future growth pipeline.

In the third quarter report (December 2008), Home Depot said, "We recognized $564 million in total pretax charges for the first nine months of fiscal 2008 related to the store rationalization plan, including $3 million in the third quarter of fiscal 2008." Clearly, the store rationalization plan was not complete and more cuts were to come.

The homebuilding sector collapse has been longer and deeper than even the most pessimistic expected. Prices continue to fall and foreclosures keep rising. With so much supply on the market, the end does not seem near.

The result of the carnage will be a change in behavior that always comes with crisis. The biggest trend I see happening will be with respect to new construction, or, shall we say, the lack thereof.

Homebuilders are operating at historically low levels, meaning less supply on the market. But the assumption that demand for new homes will magically reappear once that supply dissipates is erroneous. Instead, look for homeowners to focus on making do with current stock.