Housing Market Shows Signs of Slowing Down

Housing sales are traditionally a strong driver for mattress sales. Recent data cited in the National Association of Manufacturers’ (NAM) Monday Economic Report for this week, however, suggests that the U.S. housing market is softening. Existing home sales fell 2.4% from 5.75 million units at the annual rate in March to 5.61 million units in April. Supply chain challenges, the lack of inventory, higher mortgage rates and affordability continue to be issues for the existing home sales market. On a YoY basis, existing home sales fell 5.9% from 5.96 million units in April 2021.

New residential construction activity edged down 0.2% from 1,728,000 units at the annual rate in March to 1,724,000 units in April. Single-family housing starts dropped 7.3% from 1,187,000 units to 1,100,000 units, declining for the second straight month to a six-month low. The headline figure was boosted by strength in the multifamily segment, jumping 15.3% from 541,000 units to 624,000 units. On a YoY basis, new residential construction has increased 14.6%, with single-family activity up only a modest 3.7%.

The Housing Market Index declined from 77 in April to 69 in May, the lowest reading since June 2020, according to the National Association of Home Builders and Wells Fargo. The index for current single-family homes fell from 86 to 78, and the index for the traffic of potential buyers dropped from 61 to 52. At the same time, the index for expected single-family sales decreased from 73 to 63. Readings above 50 are consistent with more builders being positive than negative in their market assessments. These data suggest that the housing market might be cooling, with higher mortgage rates and affordability being top of mind for builders and potential homebuyers.