Ready for a recovery

Home sales and housing starts staged an uneven comeback starting in early 2009, according to the State of the Nation’s Housing report released by the Joint Center for Housing Studies of Harvard University.
Even if the recovery in sales and residential construction flourishes, the report warns, the adverse consequences of the recession and the financial crisis will linger. An estimated one in seven homeowners have homes worth less than what they owe on their mortgages and nearly 5 million need their home prices to rebound by 25 percent before they are back above water. In addition, it will take time to work through all the homes in foreclosure.
Despite falling home prices, loan modifications, and softening rents, the downturn did not reduce the number of households spending half or more of their income on housing—18.6 million in 2008. Instead, the share with such severe housing cost burdens climbed to a new height.
Is a recovery coming? Hooker Furniture announced reported net sales of $51.4 million and a net income of $1.1 million. The profit reversed a $456,000 loss in the comparable quarter a year earlier. While this may not signal unbridled consumer spending, purchases can only be put off for so long.
Stay tuned.

Furniture Buying Index slides to 55

The Furniture Buying Index has fallen two points to a reading of 55, the same as this time last year, according to America’s Research Group.
“More and more consumers are concerned about the national debt and are worried about government interference,” said Britt Beemer, chairman of America’s Research Group.
“Job security is a major worry for many Americans,” Beemer said. “... These fears have many consumers much less enthusiastic about buying furniture."
While consumers are hesitant to invest in furniture, it's important to remember that you can only put off a purchase for so long. Eventually, you have to buy a new chair, bed or furnish a home. The purse strings will loosen but probably not until next year.

Furniture Buying Index remains at 56

The Furniture Buying Index remained unchanged this month at 56, according to America’s Research Group.
Britt Beemer, chairman of America’s Research Group, said, “This is somewhat positive for the furniture industry since at least the index did not go down …”
The Furniture Buying Index is compiled each month by America’s Research Group from interviews with 5,000-8,000 consumers across the U.S.
This may be an indicator that the recession has bottomed out or at least stabilized. While consumer confidence remains low, I think furniture manufacturers will have to offer rock-bottom prices to get customers into showrooms.

Furniture Buying Index drops to 56

The Furniture Buying Index fell three points this month to a reading of 56, according to America’s Research Group. The index is compiled each month by America’s Research Group from interviews with 5,000 to 8,000 consumers across the U.S.
In a typical month, 80 percent of the consumers interviewed can name a specific furniture item they intend to buy. The index’s mark signifies what percent of the benchmark 80 percent actually have a particular item or furniture trend in mind.

The economy will turn more positive in the latter half of 2009

This is not a fun time to be forecasting the economic outlook for 2009.
Not only are the prospects dim, but uncertainty is at an all-time high. One thing is certainly clear: the U.S. economy slowed in 2008. Economic activity in the third quarter declined 0.3 percent, the worst performance since a 1.4 percent decline in the third quarter of 2001 (thanks to the Sept. 11 terrorist attacks).
Add the turmoil in the financial markets and the current freeze in credit to this weak economic scenario and the outlook is clearly grim.
In fact, economists generally expect economic activity to slow even further into early 2009. For 2008 as a whole, economic growth is likely to average just 1.6 percent, followed by a very sluggish 1.0 percent expansion in 2009.
But the economy will turn more positive in the latter half of 2009. The Congress and the Federal Reserve have initiated a number of stimulus measures that, while taking time, will begin to be felt by the middle of 2009.
The Federal Reserve has lowered interest rates to just 1.0 percent (like they did following Sept. 11), which should stimulate economic activity once the credit markets thaw. That thaw should occur in early 2009 thanks to the Congress’ and the Fed’s efforts to shore up bank liquidity and build confidence in the banking system.
So, by the second half of 2009, GDP growth could reach 2 to 3 percent — almost back to the economy’s long-term growth potential. Although it will be a long, hard ride in getting there, the path should be much smoother by this time next year.

Surprise: Furniture orders are down

OK, so we all know that 2009 will be a challenging year, and I don’t think our new president will be able to offer a quick fix. Car manufacturers to furniture makers are feeling the crunch as wary consumers pull back. Until consumer confidence is restored luxury good makers and big ticket items will continue to experience decreased to flat sales.
Orders for new residential furniture fell by 28 percent in October 2008 compared to a year earlier, according to a manufacturer survey from High Point accounting and consulting firm Smith Leonard. New orders in October were down by 13 percent from September and year to date though October 2008 orders were off by 12 percent. Shipments of completed orders were 20 percent lower in October 2008 compared to October 2007 and year-to-date shipments were 11 percent less than the year prior.
As a result furniture companies are shedding jobs. I just read that Michigan-based Kindel Furniture Co. laid off 24 employees and is adding a four-day work week. Even though sales were slightly up for 2008, a waning backlog and fewer orders from High Point Market made the cuts necessary.