Last week’s announcement of the largest interest rate hike by the Federal Reserve in 28 years causes concern for anyone wanting or needing to borrow money. Whether in the market for a new car or a new home, the move could very well stop consumers in their tracks for fear they simply won’t be able to afford the higher borrowing costs.
For the furniture business, that — along with the prospect of future increases — is causing alarm because home sales are tied to peoples’ desire to purchase new furniture. It also comes on top of what industry sources have already described as a sudden and significant slowdown in retail furniture purchases. While spending has not stopped, it probably feels that way to some when compared with the high levels of demand seen during the pandemic.
Evidence of that also has been seen in recent Commerce Department reports that furniture retail sales are among the slowest growing of any category it tracks as (we’ve reported here).
Obviously, inflation on finished goods, along with gas and food prices, hasn’t helped, which is the key reason for the Fed’s action — to curb inflation. But the move could take a while to have the desired results, especially as outside factors beyond its control, such as the war in Ukraine, continue to put pressure on fuel and food supplies.
And we haven’t even mentioned the word recession yet, which continues to lurk around the corner.
More hopeful signs
But is the news all bad? Not by any stretch, particularly for the home furnishings industry. One major positive is that homeownership remains relatively strong. According to research from Statistica, the homeownership rate in the United States was 65.5% in 2021. While down from a previous high of 69.2% in 2004, it’s also risen at one of the fastest rates on record during the past couple of years.
And even during prior years of decline, it didn’t seem like the furniture industry fared too poorly as sales continued to rise, thanks, in part, to the greater awareness and interest in furniture created by major brick-and-mortar and e-commerce players alike. That interest obviously peaked during the early days of the pandemic as people sheltered in place and began to invest more in their homes.
However, investing in one’s home doesn’t need to stop just because people can’t afford to trade up right now. That’s been a fallacy that perhaps has held back the industry in the past. Opportunities to update one’s living space abound, whether we’re talking about refurbishing a kitchen or bathroom or buying a new living room furnishings. What about the guest bedroom that hasn’t been updated in years, much less the primary suite?
And we haven’t even touched on people moving into apartments, which are being built all over the country. Many of these beautiful, upscale dwellings need to be furnished, too.
So, while the news isn’t great, people will continue to borrow money for such purchases and banks will continue to lend as fast as they can — at least to those who qualify. A trusted source in the banking sector said the demand to borrow money continues at a breakneck pace, although some of that is to get approved before rates get too high.
“Never Stop Furnishing”
The question is, will the furniture industry sit back and let these consumers pass them by? We hope not. The demand at places like home improvement stores isn’t likely to decrease anytime soon. Been to a Lowe’s or Home Depot lately? If not, go on any weekend day and you’ll see they’re both teaming with customers.
That may be partly due to a well-known slogan — “Never Stop Improving” — that has become almost a mantra for anyone living under a roof.
We’ve said it here before and we’ll say it again: Perhaps the furniture industry needs a similar slogan, something like “Never Stop Furnishing” or “Keep on Furnishing.” Perhaps there’s a better one out there, but we all could benefit from a national marketing push right now. When demand slows, you don’t want to stop marketing to your customers, whomever they might be. Otherwise, you are nearly guaranteed to watch business walk out the door.