NEW YORK (AP) — Many small businesses tied to the housing market are experiencing a slowdown in business, which is expected to continue through 2020.
Reports on home sales, the home improvement market, and furniture and home furnishings sales show the fallout from rising house and apartment prices.
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 driven by falling mortgage rates, potential buyers are put off by ever-rising house prices. The median selling price of a home was up nearly 6% from a year ago, to $272,100, real estate agents said. A shortage of homes on the market also dampened sales.
Meanwhile, the Commerce Department said Thursday that new home sales fell 0.7% last month.
Many homeowners repair or renovate their home before putting it on the market or after buying it. But with fluctuating sales, there are fewer renovations going on and so contractors, many of them small businesses, are getting less work. Harvard University’s Joint Center for Housing Studies predicts that renovation 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 renovation activity next year,” Chris Herbert, the center’s chief executive, said in a statement.
The leading indicator of renovation activity in the center showed that spending on home renovations and repairs increased at an annual rate of 5.9% to 5.9% in the third quarter, against 6.6% in the second quarter. . It peaked at a 7% gain in the fourth quarter of last year. It is expected to fall to minus 0.3% in the third quarter of 2020, indicating lower remodeling activity.
Sales of furniture and home accessories, meanwhile, fell 0.2% in 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, fell 3.9%. When people aren’t buying new homes, they have less reason to shop at these retailers.
The Commerce Department figures do not break down the sales of small retailers or independent retailers versus large chain stores. However, the trends of smaller companies tend to mirror those of their larger competitors.