Chill in the market seeps into other industries

High home prices and elevated mortgage rates, which squeezed the housing market last year, have dragged down a number of other related sectors, such as real estate services and mortgage lending. But housing is such a crucial cog in the U.S. economy that its slowdown has also threatened industries such as home improvement and storage.

“Existing home sales are under so much pressure,” said Sean O’hara, president of fund-management firm Pacer ETFS. “We’re sort of exiting a phase where real estate, across the board, had an excellent environment.”

Sales of existing homes, which make up most of the nation’s housing stock, were down roughly 7% in November from a year earlier, according to the National Association of Realtors.

Federal Reserve policymakers held interest rates steady at their meeting in December and signaled that the central bank would begin cutting interest rates in 2024, offering hope to the residential market, which is more sensitive to interest-rate changes.

Factors that kept people from buying a home in 2023 were myriad, including soaring prices. The median price of an existing single-family home was $392,100 in November, according to the Federal Reserve Bank of St. Louis, making homebuying unaffordable for a large swath of the population, even as mortgage rates have dipped below 7%.

The contagion from the slowdown in the housing market last year has been wide-ranging.

Professionals including real estate agents and mortgage providers are the most visible collateral damage, but other service providers — such as title insurance companies, escrow companies, home appraisers and inspectors — are also seeing business dry up. Other once-hot markets are seeing a similar shift.

Companies involved in moving and storing people’s belongings are also coping with a slowdown that executives attribute to slumping home sales. In a call with analysts in August, Edward Shoen, president and CEO of U-haul, blamed a contraction in moving activity for a decline in the company’s first-quarter revenue.

Demand for furniture, appliances and home electronics has fallen, according to a Bank of America analysis conducted in 2022. Fewer people buying homes has meant lower demand for bigticket items such as sofas and home stereo systems, said R.J. Hottovy, head of analytical research at analytics firm Placer.ai.