by Sales of new and existing homes decrease, following periods of high demand
HIGH POINT — Anyone selling furniture — as a manufacturer or retailer — obviously knows the link between home sales and home furnishings sales.
Whether you’re moving into a new or existing home, there’s always a need to fill up a room you didn’t have before. Or if you are downsizing, you may want to make room by passing along a sofa, dresser or even a bed to a friend or family member.
So when the Fed began raising interest rates this past March — starting with a .25 basis point hike, followed by a .50 basis point hike in May and two consecutive .75 basis point hikes in June and July — it set off alarms for many in the industry. The Fed approved its fifth rate hike of .75 percentage basis points this past Wednesday, taking them to the highest level since 2008, according to news reports.
The good news is that word of such increases probably got people into new homes more quickly than they might have otherwise as they sought to get the best rate possible. Unfortunately, not everyone has been able to do this, potentially postponing indefinitely their efforts to move into new construction or into an existing home that better suits their needs.
The decline in building and sales activity has shown up in many of the monthly reports from the United States Census Bureau and the National Association of Realtors.
In a report issued just before the start of the October High Point Market, the Realtors group said existing home sales in September decreased 1.5% from August, the eighth consecutive decline. Compared to September 2021, they fell 23.8%.
And while the median sales price rose 8.4% (good for sellers, but not for buyers borrowing at higher interest rates) to $384,000, there was 3.2 months of inventory, up from 2.4 months in September 2021.
The biggest declines in existing home sales by region were as follows: Sales in the Northeast fell 1.6% from August, and 18.7% from last September; in the Midwest they fell 1.7% from August and 19.7% from last September; in the South, they fell 1.9% in August and 23.8% from September 2021; and in the West they remained unchanged from August but fell 31.3% from last September.
By comparison, sales of new single-family homes in the U.S. fell nearly 11% to 603,000 from 677,000 in August and fell 17.6% below the September 2021 estimate of 732,000, according to the U.S. Census.
For the year, new home sales stood at 831,000 in January then dropped to 790,000 a month later. Starting in March they made an even more rapid decline to 707,000, before dropping further to 619,000 in April, climbing slightly to 636,000 in May, then dropping again 10.2% to 571,000 in June and falling further to 543,000 in July.
New residential construction figures also released by the U.S. Census showed building permits for privately owned housing units of one to five units or more totaled about 1.56 million, up 1.4% from a revised August rate of 1.54 million, but 3.2% below the 1.61 million reported in September 2021.
Permits for single-family units totaled 872,000, 3.1% below the revised August rate of 900,000.
Meanwhile, housing starts for privately owned units in the month of September fell 8.1% to 1.44 million, from a revised 1.56 million in August and were down 7.7% below the 1.6 million reported in September 2021. Single-family housing starts were 892,000, 4.7% below the revised August rate of 936,000.
Housing completions in September totaled 1.43 million, up 6.1% from a revised August estimate of 1.34 million and 15.7% above the September 2021 total of 1.23 million. Single-family completion rates in September were 1.05 million, up 3.2% above the revised August rate of 1.02 million.
While the numbers indicate the housing market has taken a dive, one positive is that there is plenty of inventory in new and existing homes. This could put some pressure on pricing, making homes appear somewhat more affordable as consumers continue to deal with the higher interest rates.
How that plays out for furniture sales remains an unknown. Certainly retailers are having to lower prices themselves to move excess inventory in order to make room for new styles. Yet manufacturers and importers also are lowering prices because of recent decreases in freight and container costs.
Thus, a correction in the marketplace may be good on multiple fronts in order to continue consumers’ interest in furnishing their homes. Stay tuned in the months ahead as we continue to follow activity in the housing market — existing home sales included — that remains so important to our industry.
