Floor covering demand is highly correlated with interest rate cycles. Interest rate movements
affect housing demand, non-residential building construction spending, and transportation
equipment shipments. Any interest rate decline stimulates flooring sales to households,
businesses, builders, and transportation equipment manufacturers.
Currently, interest rates seem to be ending a sharp upward cycle as the Federal Reserve
raised interest rates to fight the highest inflation levels in a decade. The Fed’s efforts to fight
inflation caused mortgage rates to more than double between 2021 and 2023 resulting in a
housing and floor coverings sales recession. The decline in housing demand took some air out
of interest rates by the fourth quarter of 2023.
As mortgage rates moderated, single-family home permits and starts began to rebound and
the decline in existing home sales slowed significantly. The sharp increases in consumer
sentiment and builder confidence in early 2024 are signs these trends will continue into 2024.
The current situation mirrors historical patterns. The Federal Reserve increased interest rates
in 2018 too slow the economy. Their action immediately cut housing demand causing the Fed
to make a quick reversal the next year. Interest rates were cut again in 2020 to offset the
adverse impact of the COVID-19 pandemic. Interest rates were cut to historic lows by early
2021 causing housing demand and flooring sales to soar over the next year. Housing prices
surged along with rising demand contributing to inflationary pressures.
In response, the Federal Reserve sharply increased interest rates beginning in the spring of
2022 that caused housing demand and flooring sales to turn downward for five consecutive
quarters. Mortgage rates, however, seemed to have peaked in the fall of 2023 which began to
slow the decline in housing demand.
Any Federal Reserve interest rate cut could give an additional boost to the housing and floor
covering market in the second half. Even two 25 basis point cuts by the Fed, one in the spring
and one in the summer, will have an outsize effect on housing demand due to pent-up housing
demand. Catalina estimates there was a shortfall of about 6 million housing unit completions
(completions of single- and multi-family housing units built minus existing home demolitions)
between 2012 and 2023.
Therefore, the Federal Reserve actions in 2024 could result in housing demand and flooring
sales to increase once again. Catalina estimates mortgage rates could decline by about 15.0%
by the fourth quarter of 2024 compared to the fourth quarter of 2023. This movement could
cause housing demand to increase by double-digits by the fourth quarter and cause flooring
square foot sales to grow by 8.1% in the last quarter of the year.
Are you preparing for the decline in interest rates and the recovery in floor coverings sales
during 2024? The Catalina Floor Coverings Outlook 2024 Report
(https://catalinareports.com/product/floor-coverings-industry-outlook-2024/) uncovers the
actions needed to outperform industry growth and increase market share over the next year.
The report also provides a five-year forecast by product. In addition, the report indicates how
macro-economic trends will affect the builder, consumer, and commercial markets.
Contact Stuart Hirschhorn to discuss the findings in this and other pertinent Catalina Research
Floor Coverings Industry Reports or visit our website www.CatalinaReports.com, click on the
title and review the contents and analyzes included in these in-depth industry investigations.
Stuart Hirschhorn
Director of Research
Catalina Research, Inc.
(561) 988-0853
Shirschhorn@Catalinareports.com
www.CatalinaReports.com