The U.S. wood flooring industry depends heavily on residential markets. Catalina estimates residential markets – consumer and builder purchases – represented an estimated 78.9 percent of total U.S. wood flooring sales in 2016. This is up from 77.5 percent in 2012. Manufacturers and marketers increased their dependence on residential markets despite the housing market not fully recovering from the recession since wood flooring has significantly increased its share of new and replacement flooring sales. In fact, wood flooring’s share of residential replacement sales is estimated to have nearly doubled during the past decade. Wood flooring also made inroads in commercial markets.
The wood flooring industry has been able to tap into the growing preference for more-upscale hard surface flooring looks by expanding the availability of prefinished and easier-to-install flooring products. Lower average selling prices during the recession also stimulated demand as competitively priced foreign-sourced products entered the market. Competitive pricing is currently becoming a positive driver of demand since the recent run up in wood flooring prices is already subsiding along with a decline in lumber prices.
Consumer response to improved products and pricing has resulted in the residential replacement market increasing its importance to wood flooring manufacturers and marketers. Wood flooring residential replacement sales are estimated to have increased at an 8.6 percent compound annual rate between 2012 and 2016, and climbed to 52.6 percent of total U.S. wood flooring manufacturer dollar sales. This is up from 45.5 percent in 2007. Consumer wood flooring purchases increased at relatively sharp rates during this period despite the sluggish gains in U.S. existing home sales during this period. This is important since the turnover of an existing home drives residential replacement sales. This indicates that wood flooring manufacturers and marketers benefited from flooring replacement projects undertaken by non-movers.
Consumer wood flooring purchases were able to grow at relatively strong rates as homeowners increased their preference for higher-end hard surface flooring. In 2016, some 16 percent of total residential replacement flooring purchases is estimated to have been for wood products. This is up from 12.9 percent in 2012. Wood flooring manufacturers and marketers were able to increase their share of consumers’ flooring purchases by offering consumers more price-competitive, easier-to-install flooring in a wider range of designs including distressed, hand-scraped, and rustic looks for do-it-yourself, buy-it-yourself, and contractor remodeling projects.
Replacement sales also benefited from rising home values, which motivated moving and non-moving homeowners to invest in home improvements. The 7.2 percent compound annual growth rate in the value of an existing home between 2012 and 2016 contributed to wood flooring increasing its share of residential replacement flooring sales. In recent years, wood flooring consumer spending also benefited from sharper gains in employment levels and personal income.
The key target markets for wood flooring manufacturers and marketers are high-income households, the baby boomer population, two-person households, and the South and West regions. Some three-quarters of hard surface flooring purchases are made by households with incomes of $70,000 or more. Since wood flooring selling prices are at the higher end of the hard surface flooring market, wood flooring manufacturers and marketers may have a heavier dependence on this demographic. Baby Boomers remain a target market despite this group entering retirement age. Households headed by 55- to 74-year olds accounted for 42.2 percent of total hard surface flooring purchases in 2015, up from 23.2 percent in 2007. Marketers may begin to concentrate on the millennial generation since this huge potential market began to increase their importance to sellers of hard surface flooring during the current recovery period.
Builder purchases also contributed to growing residential wood flooring sales. Builder purchases are estimated to have increased their wood flooring purchases at a 15.4 percent compound annual growth rate between 2012 and 2016. This pushed builders’ share of total wood flooring sales to 26.2 percent in 2016. This is up from 23 percent in 2007. As a result, wood flooring purchases per new housing unit built have increased sharply during the past decade. Wood flooring purchases per new housing unit trended upward as homebuyers increased their preference for larger, more-expensive homes. In 2016, the average value per new single-family home sold is estimated to have reached $372,500 or $141.10 per square foot, both of which are records. In addition, the average size of a new single-family home sold has increased by about 8 percent during the past decade. Wood flooring manufacturers have taken advantage of these trends by offering homebuyers a wider array of wood flooring options that can be used in kitchens, family rooms, home offices, and bedrooms with improved scratch and moisture resistance.
At the same time, wood flooring made additional inroads in the commercial remodeling and replacement (or commercial contract) market. Commercial contract sales are estimated to have accounted for about 9 percent of total industry sales in 2016. This is up from 8 percent in 2012. Commercial contract sales, consisting of replacement sales or the finishing of new gray space by new occupants, are estimated to have increased by about 15.6 percent per year between 2012 and 2016. Some of the gains in commercial contract sales are due to increased usage of wood flooring in this market. In 2016, wood flooring is estimated to have accounted for 6.1 percent of commercial contract flooring sales. This is up from 4.9 percent in 2012 and only 2.9 percent in 2007.
Wood flooring’s share of total flooring purchases for new nonresidential building construction is estimated to have been some 13.5 percent during the recovery. This is up from about 10 percent in 2007. New nonresidential construction also accounted for about 10 percent of total U.S. wood flooring sales. The gains in wood flooring commercial sales were concentrated in the building or remodeling of hospitality facilities and office and retail structures.
Positive trends driving residential replacement, builder, and commercial market sales are estimated to continue into 2017. Manufacturers and marketers are expected to benefit from increasing personal income, relatively low interest rates, rising home prices, and growing corporate profits.
Catalina Research is tracking wood flooring industry trends during 2017 including an analysis of U.S. manufactured versus foreign-sourced products, customer demographics and factors driving demand, and the outlook for 2018. This data and information will be part of the Catalina Report on Wood Flooring, an Executive Summary of which will be available to all NWFA members within the next few weeks. For more information contact Stuart Hirschhorn, Director of Research at 561.988.0853 or shirschhorn@catalinareports.com.
Stuart Hirschhorn is Director of Research for Catalina Research Inc. in Highland Beach, Florida. He can be reached at 561.988.0853 or shirschhorn@catalinareports.com.