The recent decline in mortgage rates on stronger evidence that the Federal Reserve is poised to ease policy has fueled hopes of better times ahead for companies tied to the housing market. That’s likely true, but the evidence of the past few weeks suggests it’s already too late for a revival this year.
Home loan rates at around 6.5%, down half a percentage point over the past month, point to a rebound in spring 2025 from what’s been a dismal buying season so far if borrowing costs hold here or decline further. But the potential near-term boost will be modest.
Families tend to buy houses and move in line with the school calendar — spring and summer are the busiest time with the market beginning to go into hibernation in the fall. There is little indication that this year will be very different despite what’s happening with rates. A rebound in transactions and the knock-on uptick in demand for everything from building materials to home furnishings will probably be a 2025 story. This is an important consideration for the Fed as it weighs how quickly it wants to take policy rates lower to support the labor market without reigniting inflation.
We know from second-quarter earnings updates that housing-adjacent industries have been struggling given a slump in transactions. Maytag owner Whirlpool Corp. said recently that the recovery they expected this year isn’t going to happen. Materials supplier Builders FirstSource Inc. and Trex Co., a manufacturer of non-wood deck products, are among companies that cut their full-year guidance after a disappointing summer.
Builders FirstSource noted that headwinds emerged recently in the single-family market after an encouraging start to the year. Even where unit volumes remain fine, builders are responding to the affordability crisis by reducing the size of homes and making them less complex. In Phoenix, for example, the company is supplying material to 45% more homes but dollar sales are only up 15%. In the multi-family space, fewer new constructions combined with a dwindling backlog as projects are completed means the company expects sales pressures to intensify heading into 2025.
Trex started the year with enough product to supply a market that it expected would grow in the mid-single-digit range, but its full-year sales growth estimate is now closer to flat after a weaker-than-projected deck season. As a result, it’s been left with excess inventory that needs to be worked down — not a situation that lends itself to more hiring until there are clear signs of a turnaround.
