The basics of the American housing industry have changed so much that they now have the potential to radically change their relationship to businesses like residential lighting, kitchen cabinets and major appliances.
These consumer product categories have relied on the housing market for a significant share of their business – and have made forecasts based on housing statistics – for years, but the correlation between housing and home products is potentially very different these days. Retailers and vendors alike need to understand this for their business strategies.
Consider the following developments in housing that bear a direct result on home furnishings businesses.
- A significant share of homes in the country are now owned not by homeowners themselves – or even individual owners who rent out their properties – but by large financial investment firms that have been buying up an astonishing number of houses since the Great Recession.
The numbers are staggering, though nobody has an accurate estimate on totals or what percentage of the market they represent. Steinbridge Group, started by a Goldman Sachs veteran, is investing $425 million to buy up houses just in the Mid-Atlantic market. Cerebus, a big capital group that has owned some of America’s biggest companies including Chrysler, owns 14,000 homes and plans to triple that number. Other big investment firms are also getting involved.
These companies have very different buying priorities than individual home buyers, often opting for the minimal upgrades and repairs to get these houses rentable. Because they are not the ultimate home dwellers they will be making very different product selection choices.
- Both Google and Amazon are getting involved in the home building business, partnering with existing builders to include “smart home” technologies in new construction. In effect, these companies become the specifiers for many products being used in new homes, including lighting and security. This is a marked choice from home builders and contractors making these decisions.
- The market for furnished rentals – either for corporate or individual use – is rapidly rising. Last year it showed a 13% jump, the fifth year in a row it has shown increases. These units are not just being marketed to transient business workers who need a short-term rental. Many Millennials, who are preferring to own as little as possible – whether it be a car, a home or home furnishings – are finding the furnished home an attractive proposition that fits in with their spending priorities.
And again, this means that corporations are making the decisions on furnishing purchases, not individuals, with corresponding differences in spending and taste levels.
The end result of these developments is some very different buying patterns for home furnishings products. Both vendors and retailers need to dig deeper into the housing trend numbers to understand these ongoing developments.
Ten years after the Great Recession and two years after Millennials replaced Baby Boomers as the prime drivers of the housing market, what’s being bought for homes – and who’s doing the buying – is a very different profile.