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 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. Although sales are up nearly 4% from a year ago, an increase that results from 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, hitting $272,100, the Realtors said. A shortage of houses on the market has also held back sales.
Meanwhile, the Commerce Department said on Thursday that sales of new homes fell 0.7% last month.
Many homeowners repair 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 continue to decline into the third quarter of 2020.
“Continued weakness in existing home sales and new construction will lead to sluggish remodeling activity next year,” said Chris Herbert, managing director of the center.
The center’s Leading Indicator of Remodeling Activity showed spending on house renovations and repairs rose at an annual rate of 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, suggesting a drop in remodeling activity.
Sales of furniture and home furnishings, meanwhile, were down 0.2% during the first nine months of this year from what they were in 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 houses, they have few reasons to shop at those retailers.
The Commerce Department figures don’t break out sales at small or independent retailers and compare them with sales at large chain stores. However, the trends at smaller businesses tend to mirror those of their large competitors.