by First-time buyers could hold the keys to creating some movement in the market
HIGH POINT — One of the big issues that most people in the industry will be watching this year will be movement in the housing industry. That’s an obvious, for sure. But typically, most eyes are on the issuing of building permits, new construction and the completion of new homes.
Yet while those remain key economic indicators for furniture sales, as many if not more eyes and ears will be on the sale of existing homes, largely because that’s what often inspires people to move into a newly constructed home. Thus, it’s the sale of existing homes that will spur furniture sales in the weeks and months ahead. It’s an observation we’ve heard from a number of executives both on the retail and supply sides of the business.
Of course, a major factor holding things back is interest rate levels, which hovered at a national average around 7.6% for a 30-year fixed rate mortgage in mid-February, compared to just over 8% in late October and around 3.2% in early 2022.
While not anything compared to what they were in years past — a good friend and source in the industry recalled how interest rates were around 14% when he purchased a home in the late ’80s — they are still causing some people to balk at selling.
The key question, this source noted, is why would someone abandon a 3% mortgage rate for one that’s essentially more than double? A good question for sure and one that has held back existing home sales for much of the past 18 months or more.
But the point also came up about another significant part of the market that could spur both existing home sales and the sale of furniture needed to furnish those homes — first-time home buyers. This includes a large segment of the population younger and older alike that may jump at the opportunity to buy a home, new or existing. As they aren’t already benefiting from a lower mortgage rate, the rates may start looking attractive to them now, especially as they begin to settle.
In fact, they likely will be a driving force in the market as it could be a while before existing homeowners across various demographics see things starting to look in their favor.
According to the latest report issued by the National Association of Realtors, first-time buyers were responsible for 28% of existing home sales in January, compared to 31% in January 2023 and 29% in December 2023. According to the NAR’s 2023 Profile of Home Buyers and Sellers, the annual share of first-time buyers was slightly higher at 32%. In addition, the report said that the typical first-time buyer was 35 years old in 2023, down slightly from 36 in 2022.
Nearly 60% of recent buyers overall were married couples, 19% were single females and 10% were single males, while 9% were unmarried couples. Some 70% of the recent buyers overall also did not have a child under age 18 in their home, which the NAR said was the highest number on record, compared to 42% of households that did not have a child under 18 in their home in 1985.
Also, more than 40% of buyers across all segments began their search online, while 20% contacted a real estate agent. Ninety percent of recent buyers found their real estate agent to be a useful source of information. All buyers surveyed used the internet at some point in a search for their home.
Thus, there are some parallels and opportunities between home buying and furniture buying, particularly among those using the internet at some point in their search.
For first-time buyers in particular, the search for a new home, as with the search for furniture for that home, can be an adventure of sorts, thus marking a new phase in their adult lives.
So for the year ahead, the industry will obviously be watching for interest rates to decline, which in turn will spur the market for existing home sales. But the big market to watch in this segment will be first-time buyers looking for deals, including the most competitive interest rates.
Just as their search for furniture will yield a process of discovery in styles, fabrics and finishes, their search for their first home will create a chance for them to invest in the market and a process known as refinancing that many of us existing property owners have already experienced along the way.
We look forward to seeing these new homeowners boost the housing market and furniture sales now and in the future.
