By Dev O’Reilly
Additional content by Kelly Oechslin
It’s not all gloomy news for the flooring industry this quarter as the world begins to return to normal after the pandemic. People are beginning to get vaccinated and the US economy and attitude is doing better, but it’s not yet enough to bring the flooring industry back to where we were before. This virus has changed everything and the “normalcy” that people want to return to is not going to be what they remember. To beat the virus, we need the entire world to do better, or else every country will continue to be impacted to some degree. We all need to be prepared for further twists and turns, but we look with more optimism to the positive changes we’re seeing now.
A Different Future Than We Expected
Everyone wants a goal line in sight or a signal indicating victory, yet I don’t think science, the medical world, or humankind can set a goal. If they did, what would it be? Zero deaths, fewer hospitalizations, or to just get to an acceptable number of vaccinated people? The only thing that is very clear is the fact that this virus has not yet been defeated. However, things will get better, but they will most certainly be different.
The Flooring Industry and the Housing Market
In the US, the housing market continues to be the best indicator of how the flooring industry will perform going forward. The National Association of Home Builders (NAHB), plus the HMI index are good sources of information that forecast the flooring business activity. Indications are that residential construction will remain a leading flooring growth element of the recovering economy.
NAHB anticipates GDP growth to accelerate in the second half of the year, after a majority of the U.S. population has been vaccinated. This process will be the most important element of the economy in 2021, as it will allow hard-hit sectors in the service industries to begin to recover and diminish the shutdown risks harming small businesses.
The outlook for housing remains positive and the overall economy is expected to record a solid gain for GDP growth in 2021. This growth and the easing of pandemic-related restrictions, while good news for the overall US economy, will put upward pressure on interest rates. Flooring industry professionals should consider the impact of higher interest rates on their operations. Rising costs can act as a major factor inhibiting housing growth.
Flooring industry professionals should consider the impact of higher interest rates on their operations. Rising costs can act as a major factor inhibiting housing growth.
Additional Factors Impacting The Flooring Business
There are several other factors that could impact residential, multi-family and commercial construction in 2021. These include:
- Supply-side pressures
- Raw and finished material availability
- Logistic issues
- Resurgent lumber prices
- Limited lot supplies
- Unanticipated flooring supply-chain issues
- Persistent skilled labor shortage that could lead to higher costs and longer build times this year.
There is also a limited inventory of existing single-family homes. This created significant price increases in 2020 and will continue in 2021. The impact of higher prices and rising rates will price some households out of the housing market this year.
Regardless, the HMI and NAHB forecast gains for single-family construction in 2021, but at a slower growth rate than 2020. Remodeling will remain strong as people continue to upgrade existing homes. The multifamily construction market will experience weakness as rent growth slows and vacancy rates rise. However, most economists agree the property development market should stabilize by 2022.
… continue to hang on and invest in your staff and your business. Forge ahead with learning all you can about your software system and all the business and marketing tools available to you to help engage and reach new and existing clients.
Moving Forward For This Year
The takeaway for the next three months is for flooring businesses to continue to hang on and invest in your staff and your business. Forge ahead with learning all you can about your software system and all the business and marketing tools available to you to help engage and reach new and existing clients. Find ways to incentivize your install crews and make their communication easier and mobile. Invest in self-care and recognize that every one of us has been through a lot, no matter your current situation. Give yourself a break and those around you. And most of all, be open to the change that seems to be inevitable and look for ways to create success as a result.← Blog