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As housing market rebounds, dealers seize opportunity

Aug. 17/24; Volume 30/Number 5

By Ken Ryan

Screen Shot 2015-08-26 at 11.26.18 AMThe National Association of Realtors (NAR) reported earlier this month that existing home sales in the second quarter increased in 93% of the metro areas it measures, an encouraging sign the housing industry is continuing its recovery.

For many flooring dealers, that news merely confirms what they already see in the marketplace: flourishing business fueled by housing and other economic data.

Louisville, Ky., seems to be an especially vibrant market, at least according to Sam Kinnaird’s Flooring and The Flooring Gallery, which together have eight stores.

“I have definitely seen an increase in our business in the last few months,” said Jim Mudd, president and owner of Sam Kinnaird’s. “I would like to say the strengthening of the housing market is the main reason, but I really believe the fact that the consumer finally believes that low gas prices are here to stay for some time is kicking this thing into high gear. This low gas price windfall is pushing new housing along with remodeling work. Both of these [conditions] have finally started to catch up with our commercial side. There is light at the end of that tunnel.”

Nick Freadreacea, president of The Flooring Gallery, said the builder/new construction business “is showing steady growth in our markets since the beginning of the second quarter and the balance of the year looks strong. I have spoken with several board members of the WFCA [World Floor Covering Association] who are retailers also reporting strong growth.”

Regionally, existing home sales in the Northeast increased 10.3% in the second quarter and are 8.6% above where they were during the same period last year, according to the NAR.

Dealers in the Northeast are not surprised. Mike Foulk, president of Foulk’s Flooring America in MeadvillScreen Shot 2015-08-26 at 11.26.48 AMe, Pa., said he has seen an uptick in both new housing starts as well as a “larger than normal amount of housing sales. In our area the realtors have a low inventory of houses to show which is fueling a bump in new housing.”

A.J. Boyajian, co-owner, A.J. Rose Carpets & Flooring, with three Massachusetts locations, added, “The housing market in the Boston area is very strong and we have seen an increase. When people move on, one of the things they often look to do is replace a floor in the new home. So when people are moving we see an increase in business. Also, when property values go up people often look to put money into their homes and flooring is a very popular option when it comes to renovating.”

Bill Zeigler, owner of Charles F. Zeigler & Sons, Hanover, Pa., a Mid-Atlantic market, said his company’s focus is on remodel/replacement “so we always benefit when people start moving around. If they move into a new house, someone is buying their existing home. The last half of the second quarter, and the third quarter to date, have been very strong. I see this continuing at least until yearend. It seems like financing companies have lightened up a bit so even more money is available.”

The Midwest’s existing home sales rose 13.4% in the second quarter and are 12.7% higher than a year ago, the NAR reported. CAP Carpet, which owns seven branded stores including a Carpet One Floor & Home location, a ProSource Wholesale Floorcoverings, a Big Bob’s Flooring Outlet and Floor Trader stores, has enjoyed the consistency of the Midwest market, according to Aaron Pirner, president and owner. “We are seeing a limited supply of homes and good demand. The combination of the two is driving business.”

Eric Langan, owner of Carpetland USA, with locations in Iowa and Illinois, said what is driving strength in the Eastern Iowa and Western Illinois marketplace are “an increase in consumer confidence, very low interest rates, a performing stock market and a lack of current inventory. The good thing about living and working in the Midwest is that we do not typically see the highs and lows and hostility that other markets see in regard to housing, unemployment, etc. Therefore, we’re able to capitalize on the good times and don’t necessarily fear the bad times.”

In Cincinnati, Sam Presnell, owner of The Rug Gallery, said he is predicting a better fall because of the NAR report. “Our traffic has been up the last two months over 2014, which would signify interest. That should start producing real numbers by late August.”

According to Sam Roberts, owner of Roberts Carpet & Fine Floors in Houston, all economies are influenced to differing—but usually significant—degrees by local realities. “The price of oil is certainly impacting the local economy in Houston. When you speak of stronger local job markets, folks around here would wonder what you are talking about [because the job market has been strong].”

Construction of larger projects, Roberts said, particularly in commercial, will also affect the market, with less fluctuation than residential due to the nature of builder business. “When it comes to the effect of economic circumstances on the flooring business, you might think of retail as being like a jet ski—very quickly accelerated or slowed and turned on a small radius. The builder and commercial business is more like a large tanker. Whatever is initiated takes quite a bit of time to take full effect. Our urban development business is very strong, and will likely remain so for at least 18 more months. These are mostly big projects that take one to three years to reach full fruition.”

Olga Robertson, president of the FCANetwork, said that while there are good housing numbers, home values have risen to a point where it is difficult for first-timers to purchase a home. “What we need in this country are good-paying jobs. Combine that with low mortgage rates and you’ve got a recipe for a robust housing market. Amazon just announced [it is] opening up a distribution center near Chicago and would be hiring over 1,000 people, and the media is giving them a lot of kudos. What’s so good about hiring 1,000 people and paying them $13 an hour? You can’t buy a house making $26,000 per year. That being said, there are certainly some markets that are better than others, and many of my dealers in Colorado, Kansas, Wisconsin, Arkansas and Texas are doing extremely well.”

In terms of demographics, while millennials have been the focus for housing market potential, Robertson sees more opportunity with the baby boomer generation. “I believe what’s driving some of those numbers is senior living communities,” she said. “The boomers are downsizing and want to live in an area with other boomers. Socializing is the key to longevity and aging boomers still control most of the disposable income. I do know that millennials now outnumber the boomers but they are in debt up to their eyeballs with student loans so it may be eight to 10 years before they even consider buying a home.”