Last year’s housing market was bad. Housing-related retailers probably won’t catch a break this year

The trend: The US housing market is in a deep rut.

• Few houses are changing hands. A total of 4.06 million previously owned houses were sold last year, the fewest since 1995, per the National Association of Realtors (NAR). Roughly 683,000 new homes were sold, a 2.5% YoY increase.
• Mortgage rates remain elevated. While the 30-year fixed rate inched down to an average of 6.96% last week, the first decline in six weeks, it’s still more than 330 basis points higher than before the pandemic, per Freddie Mac.
• Home prices keep shattering records. The median existing-home price jumped 6.0% YoY to a record $404,400.

Priced out: Add in the soaring costs of property taxes and insurance, and the situation is making it increasingly difficult for consumers to afford to buy a home.

• The average household income of homebuyers soared 23.6% between 2021 and 2023, per NAR, as more consumers got priced out of the market.
• The share of consumers who believe it is a good time to buy a home has declined sharply since April 2021, per the University of Michigan’s consumer sentiment survey.

The challenging conditions are unlikely to improve much this year: The US Federal Reserve signaled just two rate cuts this year as it adopts a more cautious posture given the uncertain economic environment.

The ripple effects: The tough housing market has created headwinds for a wide array of retailers, including Home Depot, Lowe’s, Wayfair, Williams-Sonoma, and Best Buy, and manufacturers like Whirlpool, Sherwin-Williams, and Samsung.

Adding to their struggles is the looming threat of tariffs.

• Trump’s proposed tariffs could cost U.S. consumers an additional $8.5 billion to $13.1 billion for furniture and $6.4 billion to $10.9 billion for appliances, one National Retail Federation study estimates.
• The ever-changing nature of the Trump administration’s tariff threats further complicates supply chain and sourcing adjustments for businesses.

Although the specifics of the administration’s tariff policies remain uncertain, it's likely that some will take effect, driving up prices and reducing consumers' spending power. That could create even worse headaches for retailers like Wayfair and Best Buy that rely on discretionary spend.

Our take: The frozen housing market will eventually thaw. In the meantime, housing-related companies should take proactive steps to position themselves for future growth.

Go further: Read our analysis of housing-related retailers’ Q3 results in our Retail & Ecommerce Earnings Q3 2024 report.

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