[Delray Beach, Fla.] Catalina Research has released its executive summary for 2020 and outlook for 2021. According to the report, the value of U.S. floor coverings manufacturer sales (shipments minus exports plus imports) could have declined 5.7 percent to $25.9 billion in 2020. Square foot sales, however, could have decreased by only 0.9 percent to 23.1 billion. Square foot sales held up better since average selling prices dropped as demand weakened, the report said.

Catalina found that manufacturer sales declined due to the pandemic lockdowns in the spring, and the uncertainty created in residential and commercial markets as the nation went through second and third waves of the coronavirus. However, the Federal Reserve’s sharp interest rate cuts and government stimulus payments kept U.S. floor coverings sales from declining at even sharper rates. These actions gave a boost to homeowner remodeling spending and new home construction. Households increased their spending on housing and home improvements since the stay-in-place orders created a need for more room for work, meals and entertainment. On the other hand, commercial markets were hurt by the lockdown since Main Street customers, such as small retailers, restaurants and professional offices, were closed or had to work at reduced capacity, Catalina said. New commercial building projects were also postponed due to the pandemic uncertainties.

The builder market benefited from increased housing demand. In fact, the builder market was the only end-use to show an increase in 2020. According to Catalina, builder flooring purchases could have increased by 1 percent in 2020 climbing to $3.7 billion, in manufacturer dollars. Builders could have accounted for 14.2 percent of total U.S. floor covering’s sales in 2020, up from 13.2 percent in 2019. Builders increased their importance to floor coverings manufacturers and marketers since 2012 as new home construction recovered from the 2008- 2009 financial crisis and housing bust. In 2020, builder purchases benefited from a 2.6 percent gain in new home completions and a 6.7 percent increase in housing starts, Catalina said. There was also a shift to single-family homes as demand for multi-family housing leveled off. This resulted in an increase in total square footage built, since the average single-family home completed is more than twice the size of the average new multi-family housing unit constructed. Some of the shift to single-family homes reflects builders increasing attention to the needs of first-time home buyers by building smaller, less expensive homes, Catalina added.

Residential sales (including flooring purchases after taking possession of a new home) could have declined by 5.6 percent in 2020 to $12.0 billion. The decline reflects the pandemic lockdowns and stay-in place orders which caused homeowners to cut back on floor coverings replacement purchases and professional installations. Homeowners were reluctant to have an installer enter their home during the pandemic. Residential sales, however, outpaced overall industry trends as homeowners turned to do-it-yourself projects to upgrade their flooring. The increase in DIY projects gave a boost to relatively easy to install had surface flooring, such as luxury vinyl tile, engineered wood flooring and laminate planks. This reduced demand for flooring needing professional installations, such as wall-to-wall carpet. Residential replacement sales also received a boost from the recovery in existing home sales in the second half of 2020 as households looked for more living and outdoor space, Catalina said. Existing home sales have traditionally driven residential floor covering replacement projects.

Meanwhile, Catalina said the commercial market has taken the brunt of the pandemic lockdowns as the economy contracted. In 2020, commercial floor coverings purchases could have declined by 6.2 percent to $8.8 billion, in manufacturer dollars. The pandemic lockdowns caused Main Street businesses to close, offices to empty and hospitality and entertainment venues to sharply cut back operations. This caused businesses to cancel plans for new structures and remodeling projects. The decline caused commercial market sales to drop to 34.2 percent of total U.S. floor coverings sales from 34.6 percent in 2019, Catalina added.

Outlook
Historic low interest rates and the availability of a COVID-19 vaccine is pointing to a rebound in U.S. floor coverings manufacturer sales during 2021, Catalina said, adding consumer sentiment has also improved since the Presidential election. U.S. floor coverings manufacturers dollar sales are estimated to increase by 3.7 percent to $26.9 billion and square foot sales by 2.5 percent to 23.6 billion. Gains are expected to be driven by LVT sales, which are estimated to increase 15 percent to 20 percent during 2021, Catalina said.

The recovery will be led by residential markets as housing starts and existing home sales continue to rise. Sales to transportation equipment manufacturers are also expected to increase sharply as domestic motor vehicle production fully recovers from the pandemic lockdown. According to Catalina, builder purchases will be driven by an estimate 5 percent increase in new home completions and a 5.3 percent gain in square foot built. Both trends should be stronger than 2020. Residential spending could receive a boost from an estimated 5.1 percent increase existing home sales during 2021, following a turnaround in the second half of 2020. The turnover of an existing home usually results in some type of flooring replacement project within six to 12 months of the home purchase. Residential replacement sales could also receive a boost from pent-up demand from non-movers as the economy reopens.

These trends could result in a 5.6 percent increase in builder floor coverings dollar purchases during 2021, and a 4.3 percent gain in residential replacement purchases. Both trends could outpace overall U.S. floor coverings sales. Commercial markets, however, could continue to lose ground due to depressed spending on nonresidential building construction.

According to Catalina, U.S. floor coverings sales are projected to increase close to 4 percent annually from 2021 to 2026, and square foot sales are forecast to increase some 2.5 percent annually. Sales could climb to $32.5 billion and 26.8 billion square feet. Demand is forecast to continue to benefit from a strong housing market since the Federal Reserve could keep interest rates near historic lows over the next few years. There is also pentup housing demand as the millennial cohort moves through their prime home buying years. In addition, builders will be trying to make up for the lack of housing starts over the past decade due to the relatively sluggish recovery from the 2008-2009 financial crisis. Single-family home completions remain some 25 percent below 2007 levels.

For more on this report and others from Catalina Research, visit http://www.catalinareports.com/.