The nation’s housing market continues to gain traction in the wake of the Great Recession and it’s boosting home furnishing sales.
An economic forecast from the trade publication Furniture/Today says consumer spending on furniture and bedding — the broadest measure of the industry’s retail performance — is expected to hit $100.3 billion in 2015, up from $96.4 billion last year.
Furniture store sales are likewise expected to rise faster, increasing this year by 4.2 percent to $54.4 billion compared with last year’s 2.4 percent increase to $52.2 billion.
That means more business for local mom-and-pop furniture operations as well as big players that have a presence in Southern California including Living Spaces and Mathis Bros. Furniture.
“I think most people in the industry think it will be a pretty decent year, unless something really changes for the worse,” said Jay McIntosh, news editor for Furniture/Today. “Consumer confidence is up and housing formation is holding steady.”
Housing formation occurs when people start new households, such as young college graduates and others who move out of their parents’ home.
“There was some worry about that because of the economy,” McIntosh said. “Young people were staying at their parents’ homes longer. But that is starting to ease a bit this year.”
Rit Mathis, general manager of the massive 460,000-square-foot Mathis Bros. Furniture store in Ontario, said he’s seen an uptick in business.
“We’ve had three consecutive years of double-digit gains and we expect more of that in 2015,” he said. “We opened up at the beginning of 2008 during a pretty rough time and the Inland Empire was one of the hardest hit areas in the housing bubble. We learned to operate in that sort of environment but we’re happy to see a good outlook for the furniture business here in Southern California.”
Rancho Cucamonga couple Tommy and Lisa Gronewald stopped in recently at Mathis Bros. to find a sectional for their living room.
“We have five boys and this would provide optimal seating,” Lisa Gronewald said. “We have a tax refund coming that we hope to see soon.”
Mattress City, which has five locations in Pasadena, also has seen healthy growth, according to Daniel Ross, the company’s general manager.
“We’ve grown every year,” Ross said.
Figures from CoreLogic DataQuick show that sales of new and existing homes and condos in Southern California rose 22.8 percent in December to 19,205 and were up 4.3 percent year over year.
The Furniture/Today report links increased home furnishing sales to a variety of factors including falling unemployment, a brighter GDP forecast and increasing disposable income among consumers.
The nation’s unemployment rate edged up slightly to 5.7 percent in January compared with 6.6 percent a year earlier. California’s jobless rate also has fallen. In December, the state’s unemployment rate dropped to 7 percent from 8.3 percent a year earlier, according to the state Employment Development Department.
The nation’s gross domestic product — the total dollar value of all the goods and services — is expected to rise 2.9 percent this year. And real disposable income will rise 2.8 percent this year, up from last year’s 2 percent increase.
Furniture/Today predicts existing homes sales will hit 5.2 million this year with new home sales topping out at 525,000.
Bob Maricich, chief executive officer of International Market Centers, the world’s largest operator of showroom space for the furnishings, home decor and gift industries, says things are headed in the right direction. But he still describes the U.S. housing market as “tepid but solid.”
International Market Centers operates 11.7 million square feet of world-class exhibition space in Las Vegas and High Point, N.C.
“In my view this will be the longest and shallowest recovery we have ever experienced,” Maricich said. “After every other recession there has been a dramatic bounce in consumption, but it just didn’t happen after this recession. But it’s solidly moving forward.”
The dramatic decline in gasoline prices has helped, according to Maricich.
“We have an economy that is almost 70 percent based on consumer spending and they just got a pay increase,” he said. “I’ve seen estimates that people have saved $750 to $1,200 annually.”
Unfortunately, gas priced have begun spiking again as California refineries convert from their winter blend to the summer blend. Two of the state
Another factor that will figure into the mix is how millennial consumers will behave.
“We know how the baby boomers and Gen-Xers behave, but now we have about 70 million millennials coming in,” Maricich said. “Are they going to want to live in tiny apartments in the center of the city? We’re generationally getting to a pivot point. Aging baby boomers are exiting the market and a whole new wave is moving in. That reinforces where the jobs are. People are migrating back into cities where there is public transportation.”
Limited job prospects and student loan debts have made it challenging for millennials to save for a down payment and take advantage of low interest rates in the current economic recovery.
As for Lisa Gronewald, she figures their budget for a sectional won’t exceed $3,000.
“The last time we bought a sofa was 11 years ago,” she said. “We really need it.”
