Catalina’s Hirschhorn to speak at TISE

Monday, January 30, 2023 from Floor Covering Weekly

By any measure, 2023 will be a challenging year for the floor coverings industry. Historically, every time mortgage rates increased housing demand declines. And when housing demand declines flooring sales suffer. The past year has been no exception. The nearly 80 percent increase in mortgage rates in 2022 resulted in housing demand (new completions, existing home sales, and manufactured housing) declining by about 14 percent. And the full impact of rising mortgage rates will be felt in the first half of 2023. Existing home sales could drop by 23 percent and new home construction could decline by some 20 percent in the first half.

So, the goal in 2023 is to uncover sales opportunities to counter the expected decline in sales. Floor coverings square foot sales already began to decline in the second half of 2022, and the trend will accelerate in the first half of this year.

To uncover these opportunities, you have to evaluate how rising interest rates will affect each end-use market: consumers, businesses, and builders. Evaluating how rising interest rates impacts these markets will give you insights into how various flooring products will trend. For example, the consumer market is the heaviest user of wall-to-wall carpet and area rugs, while wood flooring suppliers are most dependent on the builder market. Meanwhile, the ceramic tile and resilient flooring sectors have the highest reliance on the commercial market.

Therefore, the factors affecting each end-use market will determine demand for various flooring materials. Carpet and area rug sales will be most affected by existing home sales, personal income growth, the direction of home prices and the confidence of non-movers to invest in a flooring replacement project. Commercial market strength or weakness will mirror non-residential construction spending, and even which type of structure is being built. Main Street commercial sales will depend on small business confidence. Builder purchases track the number of new permits and housing starts. It also depends on whether demand is for single-family or multi-family housing. Regional market trends can also affect product sales.

When all the end-use market sales data is pulled together you can see how rising interest rates will affect demand by product in 2023. You will also uncover where to direct your marketing effort by application, channel, and region.

I will be speaking at Surfaces 2023 on Jan. 31 on how investigating the factors driving end-use market demand will uncover sales opportunities. I hope to see you there and discuss how we can make it through a very challenging year.