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Hirschhorn Forecasts Future of Residential Flooring Replacement - Part 2

Stuart Hirschhorn, Director of Research, Catalina ReportsPart 1 of this post - Stuart Hirschhorn: Residential Flooring Replacement Sales May Rise in 2010 - appeared on Tuesday, October 6, 2009. Both posts include excerpts from the September 2009 Catalina Floor Coverings Quarterly Update. Mr. Hirschhorn is the director of Research for Catalina Research and a consultant with the Floor Covering Institute.

In Part 1 of my post earlier this week I reported on the state of the flooring industry - that we estimate existing home sales may rise by 4.8% in the third quarter of 2009 over the same period the previous year. This compares to a 2.8% drop in the second quarter, a 7.4% decrease in the first quarter and a 13.1% decline for all of 2008.

Based on the improvement in existing home sales this quarter, Catalina estimates that total floor coverings square foot sales could decline by 10.0% during the fourth quarter of 2009 (see chart in previous post). This is a one-third improvement from the decline in the second and third quarters and only about half the decline in the first quarter. This better performance reflects the expectation that residential replacement sales receive a boost from increasing existing home sales. Some 10.0% of homebuyers invest in new flooring over the first year of ownership, replacing an estimated 120 square feet of flooring per existing housing unit sold.

Despite a better outlook for the fourth quarter of 2009, floor coverings square foot sales are estimated to drop by a total of 15.1% for the entire year. This is a sharper rate than the 13.7% decline recorded for 2008.

However, if existing home sales levels continue to rise in 2010, Catalina expects U.S. floor coverings to begin to recover in the second half of 2010. Floor coverings sales are estimated to decline by 3.0% to 4.0% in the first half of 2010 as declines in the builder and nonresidential markets continue to drag down overall industry demand. However, as the overall U.S. economy begins to recover over the next few quarters, Catalina sees floor coverings square foot sales rising by 5.0% to 6.0% in the second half. This could cause total sales to rise by 2.0% in 2010.

These trends assume interest rates remain at relatively low levels, despite the Federal Reserve pulling back some of their monetary stimulus, and inventories of new and existing homes trend downward so home prices could begin to stabilize.

What have you observed in your business?

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