Myth 1: Lower mortgage rates alone will fix housing

Mortgage rates are the obvious explanation for the housing slowdown, but they are not the whole story. The average 30-year fixed rate stood at 6.76% in early September, compared with 6.35% a year earlier. More importantly, many current homeowners have mortgages well below today’s market rates, giving them a powerful financial reason to stay put.

Federal Reserve researchers estimated that this “lock-in effect” explained 44% of the drop in moves among mortgage borrowers between 2021 and 2022. The effect showed up primarily in fewer local moves and fewer homeowners moving up the housing ladder.

High rates make it harder to buy a home. Lock-in also keeps would-be sellers from listing one, reducing the total number of moves that can trigger mattress and furniture purchases.

Myth 2: One improving housing indicator means the recovery has begun

Housing is sending mixed signals. According to the National Association of Realtors, affordability has improved from a year ago, and the improvement has reached every region of the country. Yet buyers have not responded with a sustained increase in activity. Existing-home sales declined again in August after falling in July, while pending sales also weakened in July.

That tells us affordability may be becoming somewhat less restrictive, but not enough to unlock the market. Buyers still face high borrowing costs and elevated home prices, while many potential sellers remain locked into lower mortgage rates.

For mattress companies, improving affordability is an encouraging signal, not proof of a housing recovery. . We need to see sustained improvement in both pending sales and completed home sales before concluding that housing has turned the corner.

Myth 3: Housing needs to boom to boost mattress demand

We do not think housing needs to boom for the mattress industry to improve. It simply needs to become less of a drag than it has been over the past several years.

Even a modest increase in existing home sales would mean more households moving, furnishing bedrooms and replacing products they might otherwise keep longer. Housing alone won’t drive an industry rebound, especially while consumers remain value-conscious and pandemic-era purchases are still working through the replacement cycle. But it could remove one obstacle to a more stable demand environment.

The practical question for our industry isn’t, “When will housing boom again?” It’s, “When will Americans start moving more consistently.”

At ISPA, we’re watching four indicators:

  1. Existing-home sales: Several consecutive months of improvement would indicate that more households are moving.
  2. Pending sales: These can provide an earlier read on completed transactions.
  3. Mortgage rates: Lower rates could help buyers, but we will also watch whether they are low enough to loosen the lock-in effect for current homeowners.
  4. Single-family permits and starts: Permits tell us what builders intend to do; starts tell us whether those plans are actually moving forward.

Housing is unlikely to suddenly fix the mattress market. But it does not have to. If affordability continues to improve and transaction activity begins to stabilize, housing could become less of a drag on demand. After several difficult years, that would be a meaningful change for mattress manufacturers, suppliers and retailers.