If you really want to know how the housing market impacts the home furnishings and lighting business, you need to look at one specific number – and that number is good.
U.S. Household Formations, which chart the number of new households created in the country over a month’s time, hit a 27-month high in the latest numbers just released by the Census Bureau, for December 2017. Just over 1.7 million households were created in the month, an increase of 14.7 percent from the previous month and an astonishing 131 percent increase over December 2016. As such it represented the highest number of households formed since September 2015.
More importantly, the rate of formation for December 2017 was higher than the long-term average of about 1.2 million units formed.
Why is this so important? While the more commonly reported statistics on housing starts and new home sales are often cited as economic indicators, they really only reference the strength of the real estate and construction industries. They do not reflect back on how sales of home furnishings products, including lighting, will be impacted.
But Household Formation statistics do exactly that. When a new household is created, it means that people who previously lived in another household – belonging to a parent, a friend, a relative or even a spouse about to be an ex-spouse – have moved into their households.
And that’s when the home furnishings purchasing activities really start. Everyone of those new households needs the basics: pots and pans, sheets and towels and such. But they also need places to sit and – most importantly for the lighting business – something to light up the place when it gets dark.
No housing-related number is more important to the furnishings business than household formations and that’s why December’s news is so good.
In fact the entire last quarter of 2017 was good for business, showing the first three-month stretch of 1.28 million or more formations in more than two years.
Government data takes some time to compile so it will be a little while before we know if the trend continued into 2018.What do you think will happen? Be sure to subscribe to our monthly Light Source e-newsletter, where we will continue to track this important metric.