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Falling prices a drag on the furniture market, expert says

Falling prices are weighing on the furniture industry, although favorable economic factors could give the industry the boost it needs, said Jerry Epperson, director of investment research firm Mann Armistead & Epperson Ltd., to a room of furniture sellers, buyers and investors at the High Point Furniture Market in High Point, N.C., on Oct. 15.

Furniture dealers are selling more product than ever, but the price per item is dropping. In the hypercompetitive industry, it is the retailers, not the customer, who is absorbing that cost, Epperson said.

"We're selling many more units for fewer dollars," he said. "It's taken a lot of the wind out of our sales. Each of those units has to be delivered, it has to be warehoused, it has to be stored, and each of those things has a fixed cost that we have to absorb."

There is, however, some good news for the industry, Epperson said. The University of Michigan Research Seminar in Quantitative Economics estimates that private housing starts are forecast to hit 1.20 million in 2017, up from 1.18 million in 2016.

People will have more disposable income to fill those houses as well, Epperson said. Real disposable income is expected to rise 1.6% in 2017 and 3.1% in 2018, according to the university's modeling and forecasting unit. It rose 1.4% in 2016.

"There are people out there who have income they haven't spent yet," he said. "There are houses out there that aren't furnished yet."

The hurricanes that hit the country's southern and eastern coasts will also have an immediate and long-term benefit for the furniture market, Epperson said.

"People often replace mattresses and other necessitates with a low-cost make-do alternative, and when the residence is recovered, they make another, more permanent purchase," he said.

The furniture industry is also one of the last to be disrupted by e-commerce, Epperson said. Online shopping giants including Amazon.com Inc. have not figured out how to ship and return furniture, especially larger items such as sofas and dressers, at scale, he said.

"No one out there on the internet is making real money on real furniture," he said. "We're still the last industry e-commerce is going after."