Epperson: Housing slump may last until 2009
2007 is shaping up as most challenging year since 1982
Heath E. Combs -- Furniture Today, October 5, 2007
AT THE MARKET — Housing probably won’t bounce back until 2009, says industry analyst Jerry Epperson.
Epperson, who spoke at the American Home Furnishings Alliance press breakfast earlier this week, said manufacturers and importers will need to give stores ammunition to go after consumers.
In his autumn Market Overview, Epperson, managing director of Mann, Armistead & Epperson, a corporate advisory firm, said 2007 is shaping up as the most challenging year for furniture retailing since 1982.
In his latest five-year forecast for the industry, Epperson sees declining sales in furniture for 2007 and a flat 2008, with the industry hurt by weaker home sales. A housing market recovery in 2007 is unlikely because the majority of home sales occur between April and October, he said.
Epperson holds that a much bigger problem for the furniture and bedding sector is the decline in financing for more expensive homes with “jumbo” mortgages above $417,000, which are too large to be guaranteed by Fannie Mae or Freddie Mac. Homeowners in 3,000-square-foot homes and up tend to spend about six times more money decorating their homes, and a downturn in the sector could be a serious problem for furniture sales.
Big-ticket purchases also are likely to suffer because of the high level of consumer debt, uncertain home values and a lackluster job market, with Florida, Michigan and California showing the most weakness. Sluggish consumer demand for furniture, coupled with lower housing sales and the need for sharp promotions to sell product, will keep pressure on foreign and domestic factories and on retailers and could force more to close, he said.
Wood furniture imports from China were down 11.6% for the quarter ending in June, Epperson said. Shipments from Canada were down 12.6% and from Thailand were down 23%, although imports from Vietnam jumped 26%.
Epperson also forecast that excess factory capacity in the industry, among other factors, might spur more formal relationships between Chinese factories and U.S. retailers. The Chinese may even acquire retailers here, he said.
For publicly held furniture companies, the average stock is down 15.9% over the past 12 months, and would likely recover with perceived improvements in the housing sector, he said.
Epperson said there is an upside for 2007 and 2008: Bedding will have sales gains, spurred by luxury bedding and bigger sizes.
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