Does the economy affect the furniture industry? “The economy absolutely affects the industry, as furniture is a discretionary item” says Leslie Carothers of The Kaleidoscope Partnership, a social media and marketing company focusing on the furniture industry.[1]
Based on [18], the drivers for housing demand are ordered by their importances as follows:
In year 2015, 43% of young men were living at home, which is the highest rate since 1940.[2,4] The large number of young men living at home can be largely attributed to economic factors. Young people will start moving out as they became more economically independent. As new household formation is improving, so will be housing market.
On 01/27/2016, the Conference Board reported that there are signs showing the changes are coming:[5]
As economy remains strong, it will drive up housing demand (same for the market) and vice versa. One way to view the health of current housing market is monitoring the furniture business.
In Sept, 2015, Fed reported that:[6]
Based on the yearly forecast from BIFMA (Business and Institutional Furniture Manufacturer's Association), it remains optimistic for year 2016:[8]
However, housing trend can change anytime based on future economic conditions. To monitor the strength of housing market, you can monitor the performance of the following furniture-related stocks:[7]
As the Conference Board has indicated, new household formation is improving. More household formation usually coincides with increases in consumer spending on not just housing, but also on adjacent products and services including furniture, electronics, kitchen products, and groceries, to name just a few. Therefore, hopefully, we expect to see the improvement of furniture business in year 2016.
“When the economy is good people are definitely more willing to invest in furniture as well as better quality furniture as they have more money for such investments.”In this article, we will review current status of housing demand, economy in general and furniture business in specific.
 |
| Figure 1. Housing market update (2021 Dec; Source: @SuburbanDrone) |
Housing Demand
- Job Growth
- Based on [19], looking at employment in the construction industry can be a leading indicator for real estate
- Consumer Confidence
- Interest Rates
In year 2015, 43% of young men were living at home, which is the highest rate since 1940.[2,4] The large number of young men living at home can be largely attributed to economic factors. Young people will start moving out as they became more economically independent. As new household formation is improving, so will be housing market.
On 01/27/2016, the Conference Board reported that there are signs showing the changes are coming:[5]
- New household formation is improving and closing in on its long-term average of 1.2 million units
- Household formation driven by older households, but continued improvement among younger households expected
Furniture Business
In Sept, 2015, Fed reported that:[6]
- While U.S. housing and auto sales showed strength over the summer, manufacturers were feeling pressure from China's economic slowdown and the oil industry was squeezed by lower energy prices
Based on the yearly forecast from BIFMA (Business and Institutional Furniture Manufacturer's Association), it remains optimistic for year 2016:[8]
CURRENT
U.S. OFFICE FURNITURE MARKET FORECAST | ||||
Year
|
Production
|
% Change
|
Consumption
|
% Change
|
2015
2016 |
$10.3 billion
$10.6 billion |
+4.9 %
+4.2 % |
$ 13.0 billion
$ 13.9 billion |
+6.5 %
+7.1 % |
However, housing trend can change anytime based on future economic conditions. To monitor the strength of housing market, you can monitor the performance of the following furniture-related stocks:[7]
As the Conference Board has indicated, new household formation is improving. More household formation usually coincides with increases in consumer spending on not just housing, but also on adjacent products and services including furniture, electronics, kitchen products, and groceries, to name just a few. Therefore, hopefully, we expect to see the improvement of furniture business in year 2016.
Photo Credit
- condoinnorthvancouver.com
References
- Does the economy affect the furniture industry?
- Millennials Are Setting New Records—for Living With Their Parents
- Why Millennials Still Live With Their Parents
- Young adults living in the parental home: 1960 to present
- New Report Finds a Major Shift Underway in Housing Demand
- Fed report shows autos and housing fueling US growth
- HNI: Why It Makes Sense To Buy This Furniture Maker (09/23/2013)
- BIFMA (Business and Institutional Furniture Manufacturer's Association
- First Autos Wobbled, Now It's Housing
- As I have often said, housing is the single most leading sector of the economy, and if I could have only one data series, it would be housing permits (which are less volatile than, and slightly lead, starts).
- S&P/CASE-SHILLER 20-CITY COMPOSITE HOME PRICE INDEX
- NAHB Housing Index
- NAHB survey has been a very valuable leading and corroborative macro economic indicator for literally decades now.
- National Association of Realtors
- NAR's Pending Home Sales Index for March will be released April 27, and Existing-Home Sales for April will be released May 20 (04/20/2016)
- Canary In The U.S. Housing Market: Canadian Snowbirds Cash Out (good)
- Housing Vacancies and Homeownership (St Louis Fed Res)
- Housing: Limited housing supply is the reason for everything
- MSCI US REIT Index
- Is a leading indicator for the real estate sector
- NAHB Housing Market Index: "Builders Confidence at 12 Year High"
- The HMI correlates fairly closely with broad measures of consumer confidence
- U.S. Housing: Going From Good To Great
- The most important driver for housing demand is job growth
- Consumer confidence is the next most important driver of home sales, after employment
- Contrary to conventional beliefs, empirical evidence suggests interest rates rank behind consumer confidence in terms of importance for the industry
- What The Jobs Report And The Federal Reserve Told Us About Real Estate
- RH Plunges After Big Miss On Soaring Mortgage Rates, Warns Housing Market Remains "Frozen"
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