Soft Housing Market Negatively Impacts Many Businesses, Flooring Included

New York, NY, January 3, 2025-"The sputtering U.S. housing market is hurting the businesses that depend on Americans opening their wallets to fix up and furnish their new homes,” reports the Wall Street Journal.

“Retailers announced more U.S. store closures than openings in 2024, according to data firm Coresight Research, reversing a two-year trend of net openings. Home retailers were one of the biggest drivers of the contraction, with companies such as Big Lots and Conn’s filing for bankruptcy and announcing plans to close hundreds of locations.

“Subdued home sales helped tip some already struggling businesses over the edge even though there were signs of improvement in the housing market in late 2024. Existing-home sales rose in November, chalking up their biggest year-over-year gain in over three years.

“But overall purchases of previously owned homes in 2024 were expected to hit the lowest level since 1995. Also, with mortgage rates back up to high levels from the summer of 2024, sales activity is likely to slow in the coming months.

“Big Lots filed for bankruptcy in 2024 and announced plans to close hundreds of locations.

Big Lots filed for bankruptcy in 2024 and announced plans to close hundreds of locations.

“The housing sales slowdown for most of 2024 hurt companies such as LL Flooring, which filed for voluntary Chapter 11 reorganization proceedings in August.

“‘Flooring is a hugely popular project if you’re getting your home ready to sell or you’ve just moved into a home,’ said Peter Keith, a senior analyst for financial-services company Piper Sandler. ‘It is hugely impacted by housing turnover.’

“A private-equity firm purchased part of LL Flooring in October including 219 stores, but the company is still closing more than 200 stores, or about half its portfolio.

“Home retailers were also pressured by a cool-down in demand for furniture and home-improvement materials following a surge in spending on these items when many Americans were stuck at home because of the pandemic.

“‘The consumer has since pivoted toward services,’ said Brandon Svec, national director of U.S. retail analytics for data firm CoStar Group. ‘We only need so many couches.’

“Slowing home sales reduced American spending on everything from paint brushes to hardwood flooring.

“High interest rates and inflation dragged down sales even for home-goods retailers that aren’t downsizing. Executives from home-improvement giants Lowe’s and Home Depot say rising prices caused their customers to pull back on home projects and other discretionary purchases in 2024. Retailers catering to low-income consumers, such as Big Lots, were particularly hard-hit by this belt-tightening, Svec said.

“Retailers had announced about 1,400 more store closures than openings in 2024 as of Dec. 27, according to Coresight. That number might decline because discount retail chain Big Lots said this past week it had reached a deal with a buyer to keep hundreds of its stores open.

“Pharmacies were another big driver of store closures, with CVS, Rite Aid and Walgreens closing hundreds of locations due in part to competition from online shopping and discount stores.

“More closures are on the horizon, with party-supply retailer Party City saying in late December that it will close all of its roughly 700 stores by the end of February. As of Dec. 27, Coresight had tallied 51 retail bankruptcies in 2024 compared with 25 the previous year.

“The good news for retail real estate as the new year begins is that new construction has slowed to a crawl in recent years. Retail vacancy is near historic lows while rent prices are rising, according to real-estate firm JLL, particularly in Sunbelt cities such as Phoenix, Dallas and Atlanta.

“Successful retailers, meanwhile, have figured out how to integrate e-commerce with bricks-and-mortar shopping and are opening new stores. Some dollar and discount stores added hundreds of locations in 2024 and are continuing to expand, including Dollar General and Five Below.

“‘While we saw a big uptick in closings in ’24, it’s not an inflection point for the health of the retail market,’ Svec said. ‘This is more of a normalization and a flushing out of some of the inefficient or poorly positioned retailers.’”