The trend: It’s incredibly hard to buy a house right now.
-
Home prices reached record highs in April. The median price of an existing home rose 5.7% year over year in April to $407,600, per the National Association of Realtors (NAR).
-
Mortgage rates are elevated. Mortgage rates have been north of 7% since the week ending April 18, per Freddie Mac. That’s over 300 basis points higher than rates prior to the pandemic.
-
Inventory remains constrained. Total housing inventory at the end of April was 1.21 million units, which is just a 3.5-month supply at the current sales pace (a six-month supply is considered balanced between buyers and sellers).
Not surprisingly, the market remains stuck in neutral; sales of previously owned homes fell 1.9% month over month in April, and are also down 1.9% from April 2023, per NAR.
- The challenging situation is impacting consumer sentiment and resulting in an environment where only 21% of consumers say it’s a good time to buy a house, which is tied for the worst reading in history, per a May Gallup survey reported in CNN.
Why it matters: The combination of a lack of housing turnover and elevated interest rates is weighing on a host of retailers and brands.
- Sales are down 9.0% YoY at furniture and home furnishing stores in the first four months of the year, and down 0.2% at electronics and appliance store sales, per the US Commerce Department.
- Both Home Depot and Lowe’s attributed their Q1 sales declines to the limited market for big-ticket items such as household appliances and kitchen fixtures.
- A host of other companies, including furniture retailers Wayfair and Williams-Sonoma, appliance maker Whirlpool, and paint company Sherwin-Williams, also saw Q1 sales declines.
Brighter days ahead? There’s growing sentiment from experts such as Goldman Sachs CEO David Solomon that the Federal Reserve may not cut interest rates at all this year.
- That would lock the current conditions in place and make for a continuously challenging year for home-related retailers and brands. We expect home improvement and large appliance sales will grow just 2% this year, while furniture and home furnishing sales will increase by 3.4%.