Price of Household Appliances

The prices of household appliances typically move by demand fluctuations and the cost of its major inputs, steel and plastic. Curiously, the recession of 2008 and 2009 broke this trend as the prices rose even though demand was minimal and steel and plastic prices were low. Prices increased prerecession due to the booming housing market, which caused increases in demand for new appliances to stock new houses. In addition, steel and plastic prices rose.

When the housing and commodity markets fell after the financial crisis, appliance prices rose for a few reasons. First, most appliance manufacturing moved overseas and the remaining manufacturing in the United States skewed toward more expensive, premium products. Second, new energy efficiency laws came into effect, which increased the cost of production. Finally, the federal government offered rebates to people who bought energy-efficient appliances, which artificially boosted demand. The result was a 3.7% increase in appliance prices in 2009, the largest single-year price increase since 1983. Prices then fell slightly in 2010 as the supply dried up of consumers wanting to upgrade their appliances to more energy-efficient models. However, prices returned to growth in 2011 due to the rising prices of steel and plastic as well as burgeoning demand. This trend reversed again in 2015 as input prices once again fell. However, the price of appliances increased 2.6% in 2018 and 3.9% in 2019, driven by the tariffs on several household appliances. Tariffs placed on input prices, such as steel, also increased the price of domestically produced appliances substantially.

In 2020, household appliance prices increased 1.6% despite lower consumer spending amid the COVID-19 pandemic. However, this increase comes as many consumers have shifted to remote work from home in compliance with added government regulations to slow the spread of the virus. As consumers have spent more time at home using their appliances, there has been more depreciation, leading to increased demand for replacement products. Similarly, with interest rates remaining low in the year, housing starts uptick, which helped attract consumers for household appliances to populate these new living spaces. However, the slowdown of production cycles raised the operating costs for manufacturers in the period, which contributed to rising prices of household appliances in the year. In 2021, household appliance prices rose at 3.3% as the release of pent-up demand for residential investment came to a head. Inflationary pressures in 2022 stemming from the reopening of the economy pressured manufacturers to produce more to satisfy more demand while taking in additional costs of inputs like steel and sources like energy. Prices, as a result, surged by 11.7% in 2022. While inflation has spilled over in 2023, higher interest rates have in turn depressed housing starts despite measures taken in the year to pause interest rate hikes later in the period, as this has scaled down the prices of household appliances despite their essentialness for households, which helped household appliance prices increase at a sizable but smaller rate of 3.2% in 2023. Homebuying activities have slowed because of high mortgage rates, which led to a modest 0.1% gain in these prices. By 2025, appliance prices will drop by 3.8% as homebuying remains pressured by persistent high interest rates. The Federal Reserve has indicated that it may slow down rate cuts to stabilize the economy as inflation concerns linger. Meanwhile, mortgage rates continue posing challenges because of ongoing recovery from inflated property and goods valuations, adding to the uncertainties surrounding extensive rate drops being prolonged for longer durations.