Rising interest rates resulted in a declining housing market which caused flooring purchases to drop. Total U.S. housing demand (resales, new starts and manufactured home shipments) decreased 28.6 percent between 2021 and 2023 as mortgage interest rates surged by 129.4 percent.
Housing demand drives floor covering spending since some 60 percent of the total market comes from homeowner and builder purchases. Meanwhile, commercial market sales opportunities remained on an upward trend since nonresidential building construction spending continued to increase at double-digit rates. Commercial market growth, however, could not offset the decline in residential markets.
While hardwood remains a sought-after floor, macroeconomic changes along with competitive products in other categories led to decline in sales for 2023.
According to Catalina Research, “After two years of relatively strong growth, rising interest rates resulted in a declining housing market which caused flooring purchases to drop. The wood flooring sector experienced some of the sharpest sales decline in the industry in 2023.”
2021 and 2022 sales were propelled by post-pandemic activity. Explained Mannington’s John Hammel, senior director of hardwood and laminate, “An increase in consumer demand associated with being at home during the pandemic.”
According to Catalina Research, wood flooring dollar sales may have dropped by 10.6 percent to $4.1 billion. The report also stated that “square foot sales could have dropped by 12.7 percent to 1.4 billion. In 2023, wood flooring’s share of total floor covering dollar sales could have been 11.9 percent and 5 percent of total square foot sales. This is down from 12.4 percent and 5.4 percent, respectively, in 2022.”
Much blame can be assigned to overall economics. Noted Hammel, “Inflation and high interest rates have dampened consumer demand over the last couple years. This can be said for all flooring categories. For wood specifically, the lower price-point products have seen the greatest decline. The higher you go up the price curve, the less impact these macroeconomics have on the consumer.”
Another factor is competition from other flooring categories, one company’s president, offered, “The growing popularity of alternative flooring materials like luxury vinyl and laminate has diverted consumer interest.”
As well, Catalina reported, “Manufacturers and marketers also continue to see increased competition from rigid core LVT, which is a direct competitor to engineered wood flooring. Wood flooring also has above average dependence on the builder and residential replacement markets. Wood flooring sales were especially hurt by the nearly 19 percent drop in existing home sales, which is the major driver of homeowner flooring replacement projects.”
Overall, hardwood sales remained highest with residential builders, residential replacement and commercial new construction in 2023 presenting opportunity. With the highest average value per square foot of hardwood in the past six years, there is still hope for the category. While the average price per square foot increased to $2.96 for 2023 compared to $2.17 in 2019, it also increases the value of the home. As well, hardwood suppliers continue to bring innovation and new technologies to the category to better meet consumer’s needs.
