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Factoids

Factoids offer brief snapshots of current topics pertinent to the Furniture industry based on our on-going research. Increase your grasp of current trends, consumer attitudes, and shifts within the industry through solid statistics and concise insight.

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Factoids

Charting the Progress of Survival: Furniture and Home Furnishings Stores - Ratio of Store Openings and Closings as a Percent of Total Stores at Start of the Year*

In what’s considered by many as the ‘Retail Apocalypse,’ retail store closings in 2019 are on pace to exceed closings in 2018. According to a report from investment banking firm UBS, an estimated 75,000 stores that sell clothing, electronics and furniture will close by 2026. This is the first factoid in a series of five factoids that studies a March 2019 report from the U.S. Census Bureau’s Statistics of U.S. Business, shining the light on challenges furniture and home furnishings stores have faced over the last 10+ years and continue to face going forward.

The disparity between furniture store openings and closings was the highest from 2007 to 2012. The ratio of furniture store closings as a percent of total stores averaged 11% in the five years during and immediately following the recession. Despite a boom of store openings from 2011 to 2012, the ratio of furniture store openings averaged only 8.3% in the same five years. From 2012 to 2016, the net change in stores has stayed relatively flat – never showing a positive net change for furniture store openings.

The disparity between store openings and closings has reached even wider for home furnishings stores – closing an average of 11.6% of stores per year from 2007 to 2012 and only opening a yearly average of 6.5%. Since 2012, the number of store closings have exceeded openings with the net change a negative 1.4%.

Source: U.S. Census Bureau, Statistics of U.S. Businesses, Business Information Tracking Series *March 2019 Report – Data collection ends in 2016

Housing Starts Not Keeping Up with Demand Residential Construction Workers Annual Growth

Although the U.S. now has a healthy economy, incomes are on the rise, and growth in household formations has finally started to normalize, the housing industry cannot keep up.

This is the final factoid in a series of five factoids detailing slow-to-grow housing starts, low inventories, and rising mortgages and rents.

The rebound of residential construction continues to be slow well past the recession recovery.

Labor shortages and the rising cost of land and materials has led to housing being built primarily for the higher end of the market. At a time when Millennials are fully entering their home buying years, many are being locked out – not boding well for the furniture industry.

Numerous factors have converged to create the housing shortage, one of which is lack of construction labor. The number of residential construction workers fell 21.7% in 2009 and did not begin showing positive growth (2.8 %) until 2012. While growth in construction labor has not been robust, there has been consistent increases each year since 2012 – growing an average of 5% each year from 2012 to 2019 May YTD. 

Source: U.S. Bureau of Labor Statistics *Seasonally adjusted at annual rates

Housing Starts Not Keeping Up with Demand

Although the U.S. now has a healthy economy, incomes are on the rise, and growth in household formations has finally started to normalize, the housing industry cannot keep up.

This is the fourth factoid in a series of five factoids detailing slow-to-grow housing starts, low inventories, and rising mortgages and rents.

Labor shortages and the rising cost of land and materials has led to housing being built primarily for the higher end of the market. At a time when Millennials are fully entering their home buying years, many are being locked out – not boding well for the furniture industry.

While higher interest rates and rising home prices have led to a slightly increased housing inventory in recent years, inventory levels remain historically low. In this tight housing market, affordability continues to be a challenge for both renters and first-time buyers.

Low home inventories have brought correspondingly low vacancy rates. The vacancy rate among homeowners has dropped each year since 2010 to 1.4 percent this year. Meanwhile,  rental vacancies have hovered around 7 percent for the last four years.

Source: U.S. Census Bureau, Current Population Survey and Housing/ Vacancy Survey

Housing Starts Not Keeping Up with Demand Single-Family Units vs. Multi-Family Units

Although the U.S. now has a healthy economy, incomes are on the rise, and growth in household formations has finally started to normalize, the housing industry cannot keep up.

This is the third factoid in a series of five factoids detailing slow-to-grow housing starts, low inventories, and rising mortgages and rents.

Single-Family Units vs. Multi-Family Units

Between 2010 and 2015, a shift occurred in housing starts between single-family and multi-family units. In 2010, the vast majority of housing starts (80.3%) were single family, while that number shifted to 64.3% in 2015. In 2015, multi-family units represented over a third of all housing starts signaling a growth in more affordable housing. Since that time, however, multi-family starts have fallen under 30% of total housing starts.

Regionally the ratio of single family to multi-family housing starts is strikingly different in the Northeast where multi-family housing starts represent 43.8% of all starts this year through May year-to-date. The Midwest has the lowest multi-family ratio at 25.6%.

Probably more worrisome than negative housing starts this year is the larger decline of building permits. With the exception of multi-family units up 2.9%, total building permits are down 2.4% and single-family units dropped 5.3% from 2018 to 2019 YTD.

Source: U.S. Census Bureau, U.S. Department of Housing and Urban Development

Housing Starts Not Keeping Up with Demand Percent Growth of Housing Starts

Although the U.S. now has a healthy economy, incomes are on the rise, and growth in household formations has finally started to normalize, the housing industry cannot keep up.

This is the second factoid in a series of five factoids detailing slow-to-grow housing starts, low inventories, and rising mortgages and rents.

Fewer homes are being built per household than at any time in U.S. history. According to Joint Center for Housing Studies estimates, annual construction should now be on the order of 1.5 million units, or about 260,000 higher than in 2018.

Instead, total housing starts this year are still 31 percent below pre-Great Recession levels – 1,238,000 in 2019 May (seasonally adjusted at annual rate) versus 2006 starts of 1,801,000.

After digging out of the hole left by the recession, housing starts had a 28.2 percent jump in 2012 and 18.5 percent growth in 2013, but the large increases have stalled in recent years before hitting negative growth in the first quarter of 2019. 

Housing growth regionally presents a more troubling picture for some areas. The South has the healthiest growth in housing starts, up 6.5 percent this year with all other regions posting negative growth in both single and multi-family unit starts. It should be noted that the South also has the largest increases in household formations contributing to this growth. The Midwest has the largest drop in housing starts this year – down 11.2 percent. Multi-family family unit starts are up 14.3 percent in the South, while the Midwest posts a negative growth of 20.3 percent.

Source: U.S. Census Bureau, U.S. Dept. of Housing and Urban Development, Current Population/Housing/Vacancy Survey * Seasonally adjusted

Housing Starts Not Keeping Up with Demand Furniture and Housing Indicators Industry Sales, Housing Starts, Household Formations

Although the U.S. now has a healthy economy, incomes are on the rise, and growth in household formations has finally started to normalize, the housing industry cannot keep up.

This is the first factoid in a series of five factoids detailing slow-to-grow housing starts, low inventories, and rising mortgages and rents.

The rebound of residential construction continues to be slow well past the recession and the affordability for middle-income households continues to narrow. Labor shortages and the rising cost of land and materials has led to housing being built primarily for the higher end of the market. At a time when Millennials are fully entering their home buying years, many are being locked out – not boding well for the furniture industry.  

Fewer homes are being built per household than at any time in U.S. history. According to Joint Center for Housing Studies estimates, annual construction should now be on the order of 1.5 million units, or about 260,000 higher than in 2018.

This factoid shows the key economic indicators since 2011 when the recovery from the recession began in full swing. Through 2018, the furniture industry has shown consistent growth, but industry sales slowed in the first quarter of 2019 – only increasing by 1.8 percent from 2018 Q1 to 2019 Q1. Meanwhile housing starts through May of this year are showing negative growth, down 1 percent compared to last year. Household formations are increasing at a faster pace in recent years – 112,000 units higher than housing starts from 2017 to 2018.

Source: U.S. Census Bureau, U.S. Dept. of Housing and Urban Development; Current Population/Housing/Vacancy Survey
*seasonally adjusted

Generation Z: The iGeneration Gen Zers Have Significant Influence on Family Spending

During the next five years, over 20 million consumers tagged as Generation Z will pour into young-adult status with the leading edge surpassing the age of 21 this year, graduating from college and entering the workforce. This is the final factoid in a series of four factoids detailing the demographics and shopping preferences of the newest adult generation.

Because the internet/smartphones and brick and mortar shopping have always been a part of the fabric of Generation Z, it has never been an either/or experience, but rather the two meld together. Smartphones serve as support for the brick and mortar shopping experience, not a competition to it. Studies and surveys are being published almost monthly, detailing how young Gen Zers currently shop.

In a survey by the IBM Institute for Business Value, “Uniquely Gen Z,” Gen Zers were questioned on items most purchased themselves and purchases by their parents they heavily influenced. The top purchased items by Gen Zers are clothes and shoes, books and music, apps and toys and games – over 50% of respondents choosing these items. While a low amount actually bought furniture themselves (15 percent), 76 percent responded that they have influenced parents on furniture purchases.

With the influx of Millennials, many brick and mortar stores strengthened online capabilities. Now arrives Generation Z, demanding a fully integrated shopping experience and forcing internet-only companies to turn toward brick and mortar options.

Source: “Uniquely Gen Z, “IBM Institute for Business Value (IBV), global survey of 15,600 Gen Zers between the ages of 13 and 21, as well as interviews with 20 senior executives

Generation Z: The iGeneration Studies and Surveys Showing How Gen Zers Like to Shop

During the next five years, over 20 million consumers tagged as Generation Z will pour into young-adult status with the leading edge surpassing the age of 21 this year, graduating from college and entering the workforce. This is the third factoid in a series of four factoids detailing the demographics and shopping preferences of the newest adult generation.

Media and Shopping Preferences

Because the internet/smartphones and brick and mortar shopping have always been a part of the fabric of Generation Z, it has never been an either/or experience, but rather the two meld together. Smartphones serve as support for the brick and mortar shopping experience, not a competition to it.

Gen Z are “more traditional shoppers than Millennials,” said Katherine Cullen, director of retail and consumer insights for NRF. “They are killing the idea that online and offline are separate.” It will be interesting to see as these young Gen Zers age into personal credit cards if their shopping habits move more online.

According to Brandon Pierce at SPS Commerce, the previous generation of Millennials “is accused of killing this or that industry (also television sitcoms, traditional sit-down dinner dates, golf and of course, retail shopping at malls and stores). In reality, they are only disrupting the way things have been. They still buy the products they want, consume media like movies and shows, buy groceries and eat food from restaurants. They just prefer to go about it differently. It’s a matter of needing to change old, traditional ways of marketing and selling to keep up with a younger generation’s preferred way of living. Basically Generation Z is going to be an intensified version of the Millennial tidal wave of change.”

Studies and surveys are being published almost monthly, detailing how young Gen Zers currently shop. Currently 98% of Gen Zers prefer to shop in brick and mortar stores, while almost half (46%) research items on smartphones before making in-store purchases. 60% prefer the mall to shopping – likely due to socialization and inability for younger teens to drive to multiple retail locations. 70% influence family decisions regarding items such as furniture, household goods, and food and beverage.

Generation Z – The iGeneration College Enrollment and Early Education

During the next five years, over 20 million consumers tagged as Generation Z will pour into young-adult status with the leading edge surpassing the age of 21 this year, graduating from college and entering the workforce. This is the second factoid in a series of four factoids detailing the demographics and shopping preferences of the newest adult generation.

College Enrollment and Early Employment

On their way to becoming the most college-educated, Generation Z has the highest percent of 18 to 20-year-olds enrolled in college among those no longer in high school – at 59% in 2017. Millennials in 2002 were the first generation to reach over half (53%) of young adults in college – up from 44% of Gen Xers in 1986.

Generation Z will enter the workforce with the least job experience of any cohort. Only 19% of Gen Z teens 15 to 17-year-olds in 2018 were employed full or part time during the previous year compared to 30% of Millennials the same ages in 2002 and 41% in Gen Xers in 1986. Numbers are also lower for Generation Z 18 to 21-year-olds with only 58% holding a job in 2018, compared to 72% and 78% of Millennials and Gen Xers, respectively.

Although many Gen Zers have not been in the workplace, numerous studies indicate they have an advantage over older Millennials. According to Dan Schawel, founder of Millennial Branding, “They (Gen Z) appear to be more realistic instead of optimistic, are likely to be more career-minded, and can quickly adapt to new technology to work more effectively.” He adds that “they come to the workplace better prepared, less entitled and more equipped to succeed.”

Coinciding with college education, many in Generation Z are born to more affluent families with parents having relatively higher education than previous generations. Expressed in constant 2017 dollars, Generation Z, ages 6 to 21 in 2018, lived in households with an average income of $63,700 – 2.1% higher than Millennials in 2002. In 1986, Gen Xers lived in households with an average income of $52,800 – 20.6% below today’s Generation Z.

Source: Data extrapolated from report by Pew Research Center, November 2018, "Early Benchmark Show 'Post-Millennials' on Track to Be Most-Diverse/Best -Educated Generation Yet"

Pew Research Center analysis of 1968,1986,2002 and 2018, Current Population Survey Annual Social and Economic Supplement (IPUMS). “Early Benchmarks Show Post-Millennials on Track to be Most Diverse, Best-Educated Generation Yet” – Pew Research Center

Note: Household incomes are as of the previous calendar year and are scaled to a three-person household and expressed in 2017 dollars. Poverty status is as of the previous year. Housing tenure as of March of the given year.

Industry Sales by Quarter 2012 Q3 to 2019 Q3 Bedding Industry

Preliminary estimates of Bedding growth in the third quarter of this year indicate sales have rebounded somewhat from the poor second quarter that saw declining imports and instability at retail. Sales estimates of $4.5 billion in 2019 Q3 put growth at 3% over to the same quarter last year. Unsettled trade wars further contribute to industry uncertainty.

Bedding sales have struggled the last couple of years with slow growth again in 2019. However, initial estimates indicate the second quarter of this year grew 3% over the same quarter 3 in 2018. 

2019 Bedding sales year-to-date totaled $4.5 billion, up 0.1% over the same three quarters last year. 

Source:  Impact Consulting Services, Inc. industry model 
All years have been revised based on comprehensive revisions by the Department of Commerce to Personal Consumption Expenditures