Interest rate cut welcome news for home furnishings executives
The Federal Reserve’s half-point rate cut was welcome news tempered by caution from home furnishings industry executives.
HIGH POINT – The Federal Reserve’s half-point rate cut was welcome news tempered by caution from home furnishings industry executives.
For an industry tied closely to home sales, the interest rate increases that started in March 2022 to help cool inflation and hold an economic recession at bay were challenging. Between then and 2023, the Fed increased interest rates 11 times.
This week’s cut was expected to fall between a quarter and half, and the Federal Reserve hinted that two more cuts could come by the end of this year. The group also signaled that four more reductions could come in 2025.
Mark Vitner, an economist and founder of Charlotte-based Piedmont Crescent Capital, said the rate decrease would help the home furnishings industry. “I’m hoping that in 2025 the housing market will become unstuck, and with that, we’ll see more demand for furniture,” he said.
Vitner characterized the latest business cycle as “the toughest stretch without a recession for the industry.” The key: without a recession.
There are bright spots with mortgage applications picking up and a pickup in the housing market, Vitner said, adding that with interest rates coming down, those numbers and home equity borrowing will continue to climb.
While a collective cheer could be heard throughout the industry, most industry executives believe it will be some time before any real benefit is felt; it’s not like flipping a light switch. But the boost that lower interest rates have historically offered the home furnishings industry can’t be denied.
Will Harris, president of Orland Park, Ill.-based Darvin Furniture & Mattress, was watching and waiting for the decision.
“I think it was the right way to go,” he said. “The country is more likely to avoid a general recession with aggressive rate cutting. I think it will lead to a quicker recovery for companies in the home-related sector. With continued aggressive rate cutting, the more optimistic projections I’ve heard put business picking up in the second or third quarter of next year. Less optimistic projections say the fourth quarter of next year.”
The home furnishings segment tends to mirror the housing market closely. Consumers buy new homes or move, and they often buy new furniture. As interest rates have climbed, housing formations and moves have slowed.
John Schultz, co-CEO of Pittsburgh-based John V. Schultz/Levin Furniture, sees some benefit in the rate cut for consumers and for reducing costs with its third-party financing companies. Additionally, he’s optimistic about future rate cuts.
“After the election, if we get another half point, with us being in the discretionary purchase business, that will help,” he said. “I don’t think we’ll see any effects until after the election; probably more like Q1 or Q2 next year, but it’s definitely a positive that they’re reducing rates versus raising them or keeping them stagnant.”
The rate cut was “encouraging” for Andrew Koenig, CEO of City Furniture in Tamarac, Fla.
“Obviously, the Fed raising rates over the past couple of years has been challenging for our industry,” he said. “I think they made the right call, and I think the attitude to continue to forecast cuts into this year and next year is the right move. They’ve clearly done a good job of getting inflation down.
“We’re encouraged by this move, and we approve of the direction they’re taking,” Koenig added. “Fingers crossed that we see mortgage rates go lower, and we get a better housing environment.”
Retail Editor Thomas Lester contributed to this story.
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