Here is an industry update, with a slant towards BC businesses. But we are all (across North America) materially impacted by the COVID crisis and so we feel it is beneficial to keep everyone updated with stories from all over North America flooring industries, as we are all connected in some way. If mills are closing down in Goergia, that will eventually impact supply chain for some of us in BC, so it is important to stay on top of industry trends.
Today I have been attending NWFA (National Wood Flooring Association) annual tradeshow expo. But for the first time in my life, I am attending a virtual tradeshow. Spread over 3 days, this is a unique experience and I applaud the association for being creative and putting this event on. For details on their thinking, here is a radio interview from Michael Martin, a fellow I know from the American flooring covering industry. He is currently the CEO of NWFA and he speaks to both current industry conditions (with an American slant) and the NWFA virtual convention.
Michael Martin, CEO of the National Wood Flooring Association (NWFA), and Kemp Harr discuss the NWFA’s plan to hold a virtual trade show April 29 to May 1 using the NWFAexpo.org website as a portal. Listen to the interview for more details.
If you don’t want to listen to the 8 minute interview, a couple of notes… Michael mentioned that many of his membership had stated that the start of 2020 was excellent… most were on track to have excellent years. So this is important to note as the industry was healthy and before the COVID slow down, was growing. I know at Word of Mouth Floors in Greater Vancouver that we were booming. We were having record months, month after month. So I agree that the industry was strong and healthy before this slowdown. I also believe that when we return to normal, or whatever the new normal will be, then I expect to see construction / building industry to pick back up and return to its healthy status. We may not return to the levels we had pre-COVID, but I do believe activity will ramp back up. Hopefully soon for all of us.
Pending Home Sales are down 20.8%
Washington, DC, April 29, 2020-The Pending Home Sales Index (PHSI) decreased 20.8% to 88.2 in March, according to the National Association of Realtors. Year-over-year, contract signings declined 16.3%. An index of 100 is equal to the level of contract activity in 2001.
“The housing market is temporarily grappling with the coronavirus-induced shutdown, which pulled down new listings and new contracts,” said Lawrence Yun, NAR’s chief economist. “As consumers become more accustomed to social distancing protocols, and with the economy slowly and safely reopening, listings and buying activity will resume, especially given the record low mortgage rates.”
“The usual Spring buying season will be missed, however, so a bounce-back later in the year will be insufficient to make up for the loss of sales in the second quarter,” he said. “Overall, home sales are projected to have declined 14% for the year.”
Citing results from NAR’s April 19 – 20 Flash Survey, Yun says technology tools such as virtual tours and e-signings are helping connect buyers and sellers. Fifty-eight percent of Realtors reported that buyers are using virtual tours and 43% said buyers have taken advantage of e-closings.
“Although the pandemic continues to be a major disruption in regards to the timing of home sales, home prices have been holding up well,” Yun said. “In fact, due to the ongoing housing shortage, home prices are likely to squeeze out a gain in 2020 to a new record high. I project the national median home price to increase 1.3% for the year, though there will be local market variations and the upper-end market will likely experience a reduction in home price.”
Again, this is a report pulled from our USA neighbours… but I felt the sentiment was similar to what I am hearing locally. Home sales are down, but pricing is holding pretty steady. More people are using online / virtual shopping habits and overall, the feeling is that the second half of the year we will see activity pick but up ‘somewhat’. I think these are statements that many parts of BC could agree with.
Consumer Sentiment Drops 19.4%
Ann Arbor, MI, April 24, 2020-Consumer sentiment fell to 71.8 in April from 89.1 in March, a 19.4% decline, according to final results from the University of Michigan Survey of Consumers.
Year over year, this represents a 26.1% decline.
“April's final Sentiment Index reading remained largely unchanged from the mid-month figure (+0.8 points), and households with below median incomes expressed the same level of confidence as those with above median incomes (71.9),” said Richard Curtin, Surveys of Consumers chief economist. “This merging reflects somewhat larger April declines among households with above median incomes (-19.8 points) compared with those with below median incomes (-14.0). The seven-day moving average of the Index of Consumer Sentiment indicated a second larger improvement that was quickly reversed (see the featured chart); its cause could not be linked to any direct judgements about the coronavirus. The notable divergence between the two main components of the Sentiment Index remained large. The Current Conditions Index fell by 29.4 points in the past month and by 40.5 points in the past two months, whereas the Expectations Index has posted smaller declines of 9.6 points in the past month and 22.0 points from February. While the decline in both indices indicates an ongoing recession, the gap reflects the anticipated cyclical nature of the coronavirus. In the weeks ahead, as several states reopen their economies, more information will reach consumers about how reopening could cause a resurgence in coronavirus infections. Consumers' reactions to relaxing restrictions will be critical, either putting further pressure on states to reopen their economies, or exerting added pressure to extend the restrictions even if it has negative consequences for economic prospects. The risks associated with these decisions are not equally balanced, with an incorrect decision to reopen having serious repercussions. The necessity to reimpose restrictions could cause a deeper and more lasting pessimism across all consumers, even those in states that did not relax their restrictions.”
Washington, DC, April 29, 2020-Real gross domestic product (GDP) decreased at an annual rate of 4.8% in Q1 2020, according to the advance estimate released by the Bureau of Economic Analysis.
In Q4 2019, real GDP increased 2.1%.
The GDP estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The second estimate for the first quarter, based on more complete data, will be released on May 28, 2020.
We will keep a close eye on what all this can mean for the British Columbia flooring industry. I will continue to try and share insights from other parts of North America floor industry as we are all somewhat connected. Another key topic that will impact us is the USA / China trade war that likely will continue, and possibly get worse, as the USA Presidential election nears. This potentially impacts us for a few reasons: America is the largest customer for most flooring factories in China. If they stop buying, it hurts the factories. Factories losing their largest customers may not good for Canada… if factories stay open and have the financial power to survive, then Canadian buyers can benefit. Less competition for production spots. But, if profits fall in factories because lucrative USA customers stop purchasing, then prices may go up, raw material purchases may slow down, do delays could be felt by us in Canada. Or, in severe situations, factories close, and access to product is reduced or eliminated. So it is worth keeping an eye on the macro economic impact that a USA – China trade war could impact BC flooring buyers.
Take care, send me a note or drop by our Richmond, BC showroom if you wish to discuss.