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As home sales fall to their lowest level in years, a number of industries linked to the housing market are beginning to show signs of deterioration, with homebuilders, appliance manufacturers and some retailers among those likely to suffer. biggest blow as experts worry about slowdown. could trigger a wider recession.

Key facts

In a report Tuesday, Bank of America noted that the rate of wire payments to bond and title companies, which are typically used to pay deposits for home sales, fell this year for the first time since the Covid recession in mid-2020 , according to consumer spending. data, which add to the growing signs of a slowdown in the real estate market.

The impact was perhaps most felt by homebuilders, which in August declared the nation had fallen into a “housing recession” and have seen stocks fall more than 30% this year, according to the S&P Homebuilders Select Industry Index, which includes housing. – manufacturing giants such as Masco and Owens Corning; the broader S&P 500 fell 24%.

Bank of America notes that the slowdown may also weigh on consumer spending due to the impact on housing-related segments, particularly spending on furniture, which has a “historically close” relationship with home sales and has already fallen the most of 10% throughout the year. anus.

In past housing cycles, including the crash that led to the Great Recession more than a decade ago, spending on furniture didn’t bottom out until months after home sales did, so Bank of America notes that there could still be more weakness

Others susceptible to declines include appliance makers, home entertainment companies and consumer electronics companies, including Best Buy, whose CEO last year pointed to a booming housing market as a reason for better-than-expected sales of items such as televisions and home theater installations.

Analysts are not yet convinced that housing-related fallout alone will trigger a recession, but the impact could be large: Harvard researchers estimated that market effects accounted for at least a quarter of the growth in personal consumption expenditures, which represent a sharp increase. 70% of the country’s gross domestic product.

Amazing fact

While overall retail sales rose in August, demand for items such as furniture and electronics fell nearly 2% and 6% year-over-year, the only negative annual changes among business types tracked by the Commerce Department, according to the latest data.

Against

The only home-related industry where more consumers say they will spend more, rather than less, is home improvement, Bank of America notes. On Monday, R5 Capital analyst Scott Mushkin downgraded shares of Lowe’s, saying the risks to the housing market are “too big” to recommend investors buy the stock, but other analysts, including Atlantic Equities’ Sam Hudson , point to the post-Covid environmental auguries. good for home improvement companies, especially since fewer Americans buying homes could mean more people are likely to invest in their existing property.

Key fund

The housing market continues to be one of the sectors hardest hit by the Fed’s rate hikes, and as a result, concerns that the slowdown could lead to a recession have only intensified. With mortgage applications falling to their lowest level since 1997, some analysts predict that the drop in demand will lead to a correction in house prices. On Tuesday, the International Monetary Fund said the “potential contagion effect” of such a correction would likely be “more limited than in previous recessions,” but noted that risks are emerging elsewhere in the housing sector, particularly in the United States, where more companies began to play a role in the securitized mortgage market.

Supplementary readings

Wells Fargo warns mortgage rates fall for first time in 6 weeks, but housing market slump could last several years (Forbes)

Experts predict that the collapse of the housing market could lower home prices by 20% in major markets such as Dallas and Los Angeles. (Forbes)



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