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US existing-home sales fell in October to their lowest level since 2010, as mortgage rates near 7% kept buyers away. Fewer purchases mean fewer people moving and furnishing a new place. That may weigh on Williams-Sonoma's furniture sales and project spending at Lowe's, though both were still growing and how much depends on movers is not yet known.
Source: MarketWatch ↗
When fewer people buy homes, fewer people move, so the stores that sell furniture and fix-up supplies to new homeowners lose customers too.
Sales of previously owned US homes fell 5.5% from September to a 3.75 million annual pace in October, down 8.8% from a year earlier and the lowest since August 2010. The median price edged up only 0.4% to $416,700. The 30-year mortgage rate averaged 7.18% in the week to November 5. Mortgage lenders such as Rocket Companies (RKT) make fewer purchase loans. Title insurers such as Fidelity National Financial (FNF) write fewer policies, and its revenue had already fallen 11% in the quarter to September 30. Listing sites like Zillow (Z) earn less from agents. The effect then moves to the stores. A family that moves often buys a sofa, paints rooms and fixes what the inspector flagged. Fewer moves lead to fewer of those orders at Williams-Sonoma (WSM) and Lowe's (LOW). Williams-Sonoma's sales still grew 7% (6.2% on a comparable basis) in the quarter to early August (fiscal second quarter). Lowe's total sales rose 8%, but comparable-store sales grew only 0.2%, so underlying demand was already close to flat before October's drop. How much of their sales depends on movers is not yet known.
On November 12, Williams-Sonoma shares fell 2.8% and Lowe's fell 0.8%, while remodel supplier Masco rose 0.4%. That suggests investors saw more risk for the furniture seller than for home-improvement spending.
Owners who cannot sell may stay put and remodel instead, which would keep home-improvement and furniture spending steady. The sign to look for comes in the coming weeks. If Williams-Sonoma and Lowe's report comparable sales at or above the 6.2% and 0.2% they posted last quarter, the moving link is too weak to matter.
Homeowners locked in by high rates may choose to improve the house they already have rather than move. That could keep spending at Lowe's steady, and high home prices give owners more equity to borrow against for projects.
When mortgage rates rose sharply in 2022 and 2023, existing-home sales fell sharply. Lenders and title insurers saw volumes drop, and home-improvement retailers saw weaker demand for big-ticket items.
The 30-year mortgage rate averaged 7.33% in October, up from 6.86% in September and the highest since 2000 apart from one month in 2023. That makes the monthly payment on a new home much bigger. Prices are still high too, so many would-be buyers simply stopped shopping. That's why so few previously owned homes changed hands in October.
Every home sale usually means a household packs up and moves. A new place rarely fits the old furniture, and buyers tend to fix and repaint before or soon after moving in. So fewer sales mean fewer families doing that burst of spending.
Furniture sellers like Williams-Sonoma and the do-it-yourself store Lowe's depend partly on that move-in spending. It works like a wedding season for caterers: fewer weddings, fewer big orders. That's why their sales could slow, though how much is not yet known.
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