Home sales headwinds are past, says analyst

NAPLES, Fla. — Three critical factors could help drive the home furnishings recovery following two challenging years marked by economic uncertainty, shifting consumer preferences and declining demand at Home Accents Today’s sister publication Furniture Today’s 2024 Leadership Conference here earlier this month outlining the industry’s struggles emerging from the pandemic and setting the stage for what lies ahead.

“Business in the furniture industry over the past two years has been absolutely brutal,” Keith said. “While it has moderated, it’s still down single digits. You’ve had a brutal backdrop for the year, really the past two years have been tough.”

Looking toward recovery, Keith pointed to three drivers that will help the industry rebound:

• Stabilizing mortgage rates
• Revival of existing home sales
• Strong home equity among consumers.

His outline closely ties recovery to the housing market, long believed to be a key driver of furniture and mattress purchasing.

Mortgage rates, which have skyrocketed in recent years, have significantly suppressed demand for home goods. As rates surged, home sales and subsequent furniture purchases slid. However, Keith anticipates that rates will stabilize and drop closer to 6% by 2025, creating a more favorable environment for homebuyers.

The lack of growth in existing home sales has created strong headwinds for the home furnishings market, but Keith said there had been green shoots in the segment pointing to October’s numbers that showed the first increase in three years.

“This is meaningful,” he said. “Those headwinds look to be a thing of the past.”

Keith said the number of people who refinanced in the home refinancing segment jumped when interest rates dropped in September.

While 2025 won’t likely be a “gigantic” refinancing year, Keith said the driver is moving from being a “headwind to a more neutral backdrop” for the industry pointed to data that says between 70% and 80% of cash outs go back into the house for remodels or furniture.

“The good news is that today’s homeowner has the best value sheet,” he said, adding that they have $11.2 trillion in equity they can extract from their homes. “The average homeowner has more than $200,000 available, and a lot have access to $500,000.”

While Keith outlined recovery for home furnishings, he did say that the competitive landscape in the industry remains dynamic. E-commerce giants such as Amazon and Wayfair dominate online sales, while omnichannel retailers such as Williams Sonoma and Arhaus leverage physical and digital presence to thrive.

Keith emphasized that traditional retailers have an edge. “Retailers who can bridge online and offline experiences effectively are better positioned for long-term success,” he said.

Gradual recovery is the name of the game looking ahead to 2025. Keith said called results from Black Friday sales encouraging and indicated that consumers were more confident in returning to furniture buying.

See also:

• For sale: Pandemic’s young home buyers ready to move on