Hardwood Floors June/July 2019

U.S. wood flooring manufacturers and marketers face a challenging market environment. Manufacturers and marketers have been adversely affected by a housing recession, increased competition from luxury vinyl tile (LVT), and higher wood flooring prices from increased lumber costs in 2018 and higher import prices during 2019. Higher import prices are due to the imposition of additional tariffs on Chinese-made flooring. These negative factors accelerated in late 2018 and early 2019. As a result, wood flooring lost a significant share of the total U.S. floor coverings market during the past two years. For wood flooring demand to recover, the industry needs a boost from a housing recovery driven by lower interest rates. Manufacturers must also introduce more waterproof flooring to meet consumer expectations derived from rising competition from wood-look waterproof LVT. Dollar wood flooring manufacturer sales (shipments minus exports plus imports) are estimated to decline by 5.8 percent during 2019 to $3.3 billion. Square foot sales could drop by 9.9 percent to 1.5 billion square feet. This is down from $3.7 billion and 1.8 billion square feet, respectively, in 2017. Declining sales during the past two years have caused wood flooring to lose considerable share in the U.S. floor coverings industry. During 2019, wood flooring is estimated to account for 11.8 percent of total floor coverings dollar sales, and 6.3 percent of total square foot sales. This is down from 14.2 percent and 8 percent, respectively, in 2017. Wood flooring lost share due to its heavy reliance on residential markets. Residential markets slowed in 2018 due to the housing recession resulting from the sharp increase in mortgage interest rates. The housing downturn started in the MARKET MATTERS INDUSTRY INSIGHTS 2019: A Challenging Year for the U.S. Wood Flooring Industry

existing home market where sales declined by 3 percent in 2018. The decline was sharpest in the fourth quarter when the increase in interest rates peaked. The drop in existing home sales resulted in a weakened residential replacement market since the buyer of an existing home is more likely to invest in new flooring than a non-mover. Meanwhile, the surge in interest rates in the fourth quarter of 2018 caused the builder market to weaken. Declines in home sales continued into the first quarter of 2019. As a result of these trends, consumer floor coverings spending declined in the fourth quarter of 2018 and remained on a downward trend going into the first quarter of 2019. The weakness in residential markets had a greater effect on wood flooring sales since wood flooring has the highest dependence on residential markets. Some 80 percent of total U.S. wood flooring purchases is for residential applications. In fact, wood flooring has the highest dependence on the builder market than any other floor coverings sector. Wood flooring also has been adversely impacted by the introduction of LVT. In recent years, Asian manufacturers developed rigid core vinyl planks that offer customers a waterproof floor and wood-looks with improved printed

hardwood floors www.hardwoodfloorsmag.com

16