Now that you survived the 2020 pandemic-induced recession and the uncertainties of the lockdowns and stay in-place-orders, you must plan to take advantage of the upturn in floor coverings sales in 2021. Just like real estate (location, location, location) you must concentrate on one variable: housing, housing, housing. Concentrate on builders of new housing, buyers of existing homes, and non-moving homeowners remodeling their home for more space for work, meals, entertainment, and outdoor activities. The economic environment is very favorable for continued strong housing demand and remodeling spending due to historic low interest rates, the availability of a COVID-19 vaccine, and a new round of stimulus giving a boost to personal income.
- Builder floor coverings purchases could increase by 5.6% in 2021 driven by an estimated 5.0% increase in new home completions, and a 5.3% gain in square foot built. Housing starts should have a strong early 2021 since new housing permits could have increased by about 12.0% in the fourth quarter of 2020. Gains will be sharpest in the important single-family home market as households need more space for work and play at home. Builders will also try to catch up with pent-up demand for single-family homes since the millennial generation is moving through their prime home buying years, and the lack of single-family homes built after the 2008-2009 financial crisis. Single-family home completions remain some 25.0% below 2007 levels.
- Meanwhile, the purchase of an existing home drives the more significant residential replacement market. Residential replacement flooring purchases account for some 47.0% of the total U.S. floor coverings market. The turnover of an existing home is likely to result in a residential floor coverings replacement project six to 12 months after the home purchase. The double-digit increase in existing home sales over the next six months will definitely give a boost to residential floor coverings sales in the first half of 2021 and beyond. The only factor holding back the existing home market is a lack of supply. The ratio of home sales to homes sold is at a historic low. The upside is higher home prices, which gives the owner of an existing home an incentive to upgrade their flooring replacement purchase.
- Rising home prices also give non-movers an incentive to spend on home remodeling projects. Improved consumer sentiment since the Presential election and an extra stimulus check in the mail (or direct deposit) is also giving homeowners confidence to spend on home improvements. During the pandemic, homeowners increased spending on do-it-yourself flooring projects since stay-in-place orders made consumers leery to have a professional installer enter their home. This gave a boost to purchases of engineered wood and laminate flooring, and the new rigid-core luxury vinyl planks. Area rug sales also benefited during the pandemic since rugs are purchased to finish a new hard surface flooring installation or purchased as an easy and inexpensive way to refresh the look of a room. During 2021, however, homeowners will be more willing to have professional installers work in homes as the vaccine inoculates a rising share of the U.S. population. This benefits sellers of ceramic and stone tile, wood flooring, and even wall-to-wall carpet in the colder areas of the country.
Manufacturers, distributors, retailers, and installers must look to the healthy housing market to profit from the recovery in U.S. floor coverings sales during 2021. What will be your strategy?
For more information on 2021 floor coverings market trends see the Catalina Report on Floor Coverings Industry Trends and End-Use Markets, December 2020. Contact Stuart Hirschhorn at Catalina Research, Inc. (shirschhorn@catalinareports.com or 561-988-0853) to discuss the findings in the report.