by It’s a given that home sales, be they new homes or existing ones, impact furniture sales.
So, with that thought in mind, let’s take a look at what is going on in the housing market.
For openers, I’ll say this: If housing sales were as hot as the temperature outside, we would all be in that proverbial “fat and happy” mindset.
But the sobering fact is that while it is dreadfully hot outside in many places, home sales are decidedly tepid.
Sales of existing homes dipped almost 4%, with virtually all of the country reporting year-over-year declines, per the National Association of Realtors.
And although certain aspects of the housing market are clearly trending upwards, they are not doing much of anything to help home sales. I’m talking about rates for 30-year fixed mortgages, which just reached their highest level in 21 years this week at just over 8%.
But in the spirit of equality, in addition to paying more for gas, coffee, utilities and the like, home buyers are going to have to dig deeper into those pockets when buying a home.
If you want specific numbers, the price for an existing home surpassed the $400,000 mark for the first time this year. The new record price is $410,000.
Worth noting is that even factoring in rising mortgage rates and concerns about ongoing inflation, the housing market remains fairly competitive as a result of more buyers than sellers and recent homeowners who took advantage of highly competitive interest rates not planning on moving anytime soon. Still, the current level of rates for a fixed-rate mortgage is not likely to help home sales.
On a brighter note, Lawrence Yun, chief economist at the National Association of Realtors, recently suggested that while the recovery has not taken place, “the housing recession is over.”
But he went on to temper that optimism by acknowledging that housing prices will remain high as a result of demand outpacing supply.
Buyers looking to purchase a home have had to deal with lean housing inventories as far back as 2007-08 when the housing market crashed and construction of new homes sank like a stone.
And based on a number of off-the-record-chats I’ve had with folks with their pulse on that topic, they are telling me the housing market most likely will not fully recover, at least not this year.
These realities are going to hurt first-time homebuyers the hardest. Assuming even a lower 7% interest rate from just earlier this month, someone with a salary of $75,000 a year should be looking at homes ranging in price from $150,000 to $225,000, which would result in a monthly mortgage payment of from $998 to $1,497.
While that sounds doable, the median starter home price in the U.S. in June was $242,000 — a 2.1% increase from last year and up more than 45% since the pandemic, according to new data from Redfin.
Yet, the math seems to suggest that if someone makes $75,000 or less, chances are they just may not be able to buy a house in today’s market. Again, part of the problem becomes a lack of inventory at those price points.
According to a recent report detailing home affordability and inventory from Realtor.com, homes selling for $256,00 or less make up less than one-quarter of current home listings.
One bright spot that can help our industry is the steady stream of cash consumers are still spending on home remodeling. According to a report from the Harvard Joint Center for Housing Studies, “While the pace of expenditures is expected to slow substantially this year, we’ve raised our projection for the remodeling market size in 2023 by about $45 billion, or 10.2%, to $485 billion.”
Retailers might consider partnering with home remodeling companies and holding remodeling seminars in their stores.
New room, new furniture, perhaps? While I don’t have the answers, I do know that it is a good time to try new ideas!
