The ebbs and flows of a number of industries have a significant impact on the furniture sector. Including trends in interior design, advances in logistics and, more recently, technology, a variety of forces throughout the economy frequently present new challenges and opportunities for furniture companies.
In recent years, the housing industry has been one of the most significant external factors impacting American furniture sales. After the 2007 financial crisis sent the real estate sector into a downward spiral, the market is finally showing signs of recovery. With more individuals now moving into their own spaces, furniture companies have a chance to grow exponentially.
Although it has yet to reach levels seen before the recession, the US housing market is exhibiting clear signs of recovery. Other than a slight decline in 2014, sales of existing homes have gradually risen in recent years, increasing 3.8 percent from 2015 to 2016. The 5.49 million homes sold in 2016 nearly reached the peak established in 2007, when 5.65 million existing homes were sold.
There has also been a gradual increase in the construction of new, single-family homes. Although the 559,000 new houses sold in 2016 were still 27.8 percent lower than the 2007 peak of 769,000, new home sales have increased by an impressive 82.7 percent since 2011.
The only housing market metric to exhibit a marked decline in recent years has been the construction of new multifamily buildings. But while the construction of new multiunit complexes decreased by 13 percent in 2016, the construction of single-family homes grew by 7.5 percent, and is expected to grow by 8.1 percent in 2017.
All of these factors have resulted in the lowest rates of rental unit and home vacancies in three decades. Rental vacancy rates fell to 6.9 percent in 2016, with the tightest housing crunches felt in metropolitan areas and their surrounding suburbs.
What This Means for the Furniture Sector
Housing growth is a natural boon for the furniture industry, as the move to a new home or apartment is one of the most common motivators behind a new furniture purchase. In the US, the furniture industry is growing at a faster pace than the broader economy. The US furniture market was valued at $96.4 billion in 2014—and it is projected to increase at a compound annual growth rate of 2.9 percent through 2019.
As millennials begin to establish their careers and move out on their own, they have become the largest segment of the furniture-buying population, overtaking baby boomers. While millennials made up just 14 percent of furniture sales in 2012, spending approximately $11.1 billion, this number more than doubled to comprise $27 billion in furniture sales in 2014.
With millennials driving growth in the housing market and, therefore, in the furniture sector, furniture companies must consider their unique needs and tastes to make the most of their purchasing power. Furniture designers and retailers can benefit from catering to the millennial desire for personalization, as well as their eagerness to engage with socially conscious and sustainable organizations.
Of course, technology also plays a significant role in the lives of not only millennials, but people of all ages. To cater to a new era of home renters and buyers, furniture companies must provide a convenient, secure, and engaging e-commerce experience—online sales are expected to contribute 30 percent of all furniture business in 2018, up from 21 percent just four years prior.
Furniture companies must also consider the ever-growing role of technology in their designs. Furniture equipped with wire management systems, charger ports, and other tech accommodations can blend seamlessly into a digital lifestyle, while a rise in telecommuting has driven demand for home office furniture outfitted for tech-heavy workstations.
The Matter of Mobility
While home purchases and rentals are on the rise, it is worth noting that mobility is at an all-time low. The percentage of Americans moving to new homes has steadily declined since the 1950s, falling by nearly 50 percent. As moving is a major life event that frequently leads to furniture purchases, companies must take a closer look at the people who are still moving, in order to successfully market to them.
At present, the Americans moving most often are typically non-married renters younger than 35. The younger the individual, the more likely they are to move: twice as many 20- to 24-year-olds (23 percent) and 25- to 34-year-olds (20.1 percent) moved in 2016 compared to individuals in the 35 to 44 age range. Additionally, less than 4 percent of adults older than 55 moved into a new house or apartment.
Americans who move more often also tend to earn less money. This suggests that affordability may be an important factor for furniture companies to consider when seeking to cater to customers in 2017.