When the housing market sneezes, the furniture and appliance industries catch a cold. All have suffered poor health that will extend into 2012.
Furniture sales tend to rise and fall with personal income, housing sales and formation of new households. These indicators have been in the doldrums since the real estate bubble burst and sent the economy into a tailspin.
Stagnant personal income left consumers with limited disposable income, and fewer people are moving for jobs or other reasons. Only 11.6 percent of Americans changed residences from 2010 to 2011, the lowest percentage since the Census Bureau began collecting the statistic in 1948.
The ripples have spread to manufacturing, selling and shipment of furniture, home furnishings and appliances. When people move, they often purchase furniture, furnishings and appliances. That activity has slowed in a tough economy.
Whirlpool is trimming production, laying off 5,000 workers and consolidating production facilities as the appliance maker forecasts a 3 to 5 percent drop in U.S. sales in the next four years. “Demand has dropped back to recessionary levels, and in the U.S., we’ve seen replacement demand become the vast majority of the overall demand,” Whirlpool CEO Jeff Fettig told analysts last fall.
Containerized imports of refrigeration equipment were flat at 99,942 20-foot equivalent units in the first three quarters of 2011, according to PIERS, a sister company of The Journal of Commerce.
Imports of washing machines dropped 20 percent year-over-year to 52,806 TEUs.
Containerized imports of furniture, which account for about one-tenth of total containerized import volume, were down 2.5 percent. The decline came mainly from Asian imports, which dominate furniture imports. “Furniture imports from Europe include a larger proportion of more expensive goods. The market for those goods has been affected less than mass-market goods from Asia,” Journal of Commerce Economist Mario O. Moreno said.
Since the 2006 peak of the real estate bubble, housing construction is down 75 percent, existing-home sales are off almost 30 percent and home prices have dropped 30 percent.
Housing markets have been struggling with unemployment rates hovering around 9 percent, a glut of foreclosed properties that continues to undermine house prices and tighter credit in the wake of the subprime-mortgage boom. Builders began construction last year on new homes at only about half the 1.2 million units economists say indicates a healthy economy, and finished the year at the lowest level since the Commerce Department began keeping statistics in 1959. At the peak of the bubble in 2006, 2.3 million new units were added.
Signs of hope appeared toward the end of 2011, as apartment permits and construction surged. More people are renting instead of owning, driven out of ownership by lack of jobs or credit or the expectation that prices will continue to fall.
On the positive side, economists say the lengthy slump in housing is creating pent-up demand. The final months of 2011 brought hints that the market is stabilizing, if not improving.
Housing construction permits, an indicator of future construction activity, rose 10.9 percent to a seasonally adjusted annual rate of 653,000 units in October, the Commerce Department said. That rate was well above the 587,000 units built in 2010 and 554,000 added in 2009, but well below the record 2.07 million at the peak of the housing bubble in 2005