Retailers Affected By Housing Slump

(As the housing slump continues to affect most housing markets across the nation, we begin to look at how other markets are fairing during this difficult time. )

First, many thought that the rest of the economy would be able to hold up against the perils of the housing market, but now some different numbers and figures are beginning to come through.

Not only are home sales down, but now many major retailers that not only deal with the housing market, but that are also completely unrelated are reporting decreases in revenue and profits.

A November 16, 2006 article by Barrie McKenna of Theglobeandmail.com, “U.S. housing slump depends, spreads,” gives some discouraging news on the status of our housing market and economy and general.

“First, Americans quit buying homes. Now, they may have stopped fixing and furnishing them too. Home Depot Inc. reported a 3-per-cent drop in profit in the three months that ended in October, amid mounting evidence that the U.S. housing slump is getting worse.”

“‘I don't think we've seen the bottom yet, and I don't see anything that says it's going to get significantly better in 2007,’ said Bob Nardelli, Home Depot's chairman and chief executive officer.”

Mr. Nardelli is very concerned about the amount of job losses in this industry, which is pretty much unprecedented.

“‘The loss of jobs ... in the home construction market is at unprecedented levels,’ Mr. Nardelli told analysts on a conference call Tuesday. ‘Home builders [are] basically writing off earnest money and liquidating land. We're starting to see a lot of that unemployment find its way over to the small repair and remodel contractors.’”

Not only has the housing market affected industries and retailers directly related to the real estate industry, but the problems seem to be affecting other outlets as well.

Even the way people are spending their money is different.

If Americans feel that their house is decreasing in value, they are not going to go out and spend a lot of money on a bunch of frivolous items.

This way of thinking is definitely reflected in consumer spending reports.

“In October, U.S. retail sales fell at an annual rate of 0.2 per cent — the third consecutive monthly decline, according to a U.S. Commerce Department report Tuesday.”

“But there were also sharp declines in building materials (down 0.3 per cent), furniture (down 0.7 per cent) and department store sales (down 0.7 per cent). Over the past three months, sales of building materials have plunged at an annual rate of 10.6 per cent. ‘The housing slowdown left its grimy fingerprints all over this report,’ BMO Nesbitt Burns economist Douglas Porter said in a note to clients.”

Many economists predicted that the lower gas prices that we have been seeing would cause consumers to spend their money in other ways, but this doesn’t seem to be happening.

‘‘People are being very cautious,’ said Ian Shepherdson, chief North American economist at High Frequency Economics. ‘The housing crunch is now hurting.’”

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