Rising home prices, falling sales hurting small businesses

By Joyce M. Rosenberg
AP Business Writer

NEW YORK (AP) - Many small companies tied to the housing market are seeing a slowdown in business, one that's forecast to continue well into 2020.

Reports on home sales, the home remodeling market and sales of furniture and home furnishings show the spreading fallout from rising prices for houses and apartments.

The National Association of Realtors said last week that sales of existing homes fell 2.2% in September, extending their erratic performance this year. While sales are up nearly 4% from a year ago, an increase due to falling mortgage rates, would-be buyers are being turned away by housing prices that keep rising. The median sales price for a home is up nearly 6% from a year ago at $272,100, the Realtors said. A shortage of homes on the market has also held sales back.

Meanwhile, the Commerce Department said last week that sales of new homes fell 0.7% last month.

Many homeowners fix up or renovate their homes before putting them on the market or after buying them. But with sales fluctuating, there's less remodeling going on and so contractors, many of whom are small businesses, are getting less work. Harvard University's Joint Center for Housing Studies predicts that remodeling activity, which researchers say peaked a year ago, will extend its decline into the third quarter of 2020.

"Continued weakness in existing home sales and new construction will lead to sluggish remodeling activity next year," Chris Herbert, the center's managing director, said in a statement.

The center's Leading Indicator of Remodeling Activity showed spending on home renovations and repairs rose at an annual rate of 5.9% at 5.9% in the third quarter, down from 6.6% in the second quarter. It peaked at a gain of 7% in the fourth quarter of last year. It's projected to fall to negative 0.3% in the third quarter of 2020, indicating a drop in remodeling activity.

Sales of furniture and home furnishings, meanwhile, were down 0.2% during the first nine months of this year compared to the same period of 2018, according to the Commerce Department. Sales at electronics and appliance retailers, whose merchandise includes refrigerators, washers and dryers, were down 3.9%. When people aren't buying new homes, they have fewer reasons to shop at those retailers.

The Commerce Department figures don't break out sales at small or independent retailers versus large chain stores. However, the trends at smaller businesses tend to mirror those of their larger competitors.

Published: Wed, Oct 30, 2019