Tuesday, January 5, 2010

Catalina says Floor Covering Sales Expected To Begin Recovery in 2010


Stuart Hirschhorn is a member of the Floor Covering Institute and Director of Research of Catalina Research, Inc. which provides in-depth market research on the floor covering industry. The following is an extract from Mr. Hirschhorn's most recent Floor Coverings Industry Quarterly Update.

The U.S. floor coverings market is finally seeing the light at the end of the tunnel. Catalina estimates that U.S. floor coverings square foot sales (shipments minus exports plus imports) could see only a 4.0% decline in the fourth quarter of 2009 over the same period for 2008. This could be the first time, since the first quarter of 2007 U.S. floor coverings square foot sales will not decline at double-digit rates. This improvement reflects the turnaround in U.S. housing demand during the third quarter of 2009 as existing home sales increased by 4.7%. This indicates that the rebound in floor coverings sales will be led by recovery in the residential remodeling and replacement market. Meanwhile, the builder market remains weak and nonresidential building construction spending is falling sharply.

The turnaround in existing home sales is due to increased affordability as average home prices and interest rates declined, and government programs to stabilize the housing market, especially the $8,000 first time home-buyers tax credit. The turnaround is especially important to floor covering manufacturers and retailers since some 10.0% of homeowners invest in new flooring in the first year of ownership.

Despite the improved economic environment for the U.S. floor coverings market in the fourth quarter, the entire year was quite weak. Square foot sales are estimated to decline by 13.4% for all of 2009 to 17.7 billion square feet. This is close to a 40.0% decline over the past four years. Dollar sales are estimated to drop by 16.9% for all of 2009 to $16.8 billion. This is worse than the 11.5% decrease in 2008, and reflects a 4.0% decrease in average prices as customers shift their preference to lower-priced flooring. Dollar sales are about one-third below 2005 levels.

The flattening out of U.S. floor coverings sales (shipments minus exports plus imports) is expected to continue in the first quarter of 2010. This is based on the 23.3% increase in total U.S. housing demand estimated for the fourth quarter of 2009. This gain could be led by a 30.0% surge in existing home sales, boosting the importance of the residential remodeling and replacement market even further. These gains are benefiting from the extension of the first time home-buyer tax credit and the addition of an existing home-buyer tax credit. In addition, interest rates continue to be held down by Federal programs and average home prices remain low.

As a result, Catalina estimates a small drop in square foot sales in the first quarter of 2010 with sales turning upward in the second quarter. Square foot sales are seen rising about 2.0% in the first half of 2010 and 3.0% to 4.0% for the entire year. Dollar sales are estimated to rise by 4.0% to 5.0% for all of 2010. This indicates that average prices could rise. Average prices are expected to rise as manufacturers try to recapture pricing power as demand grows and consumers seek out higher value flooring as their confidence in the recovery rises. However, overall sales trends will be held down by continued sluggishness in the builder market and a relatively sharp decline in the commercial market.

I hope this information is helpful. I'm always interested to hear from you to learn what is happening in your area of the world. What is happening with remodel sales in your area?


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