With the elections now firmly in the rear-view mirror, it’s time to get back to some semblance of normalcy. The results broke the right way for about 50% of the country and not so much for the other 50%. If you fall into the latter category, you have no choice but to deal with it and move on.
Truth be told, it was hard for me to come up with something provocative to write here given how the Presidential election dominated conversations, airwaves and social media for what seemed like eternity. People constantly asked why I never addressed it in this space. Answer: I did not want to take part in the divisiveness that these elections bring. My thought is that America got it right, and it certainly bodes well for the economy and your businesses. Then again, my thoughts and a buck doesn’t get you on the subway.
Here’s one thing I will say: You know, when I was a kid, one of the things my parents instilled upon me was never to lie. Lying was bad. I think they washed my mouth out with soap a few times if I lied. Maybe that’s why growing up, and to this day, I have a disdain for liars. When an ex-girlfriend would lie to me—and I would catch her—I’d become incensed. I found it disrespectful that I didn’t deserve the truth. I bring this up because I would watch how both Presidential candidates would flat out lie to 330 million Americans at their rallies, in their commercials, at their debates, etc. I found it to be appalling and disrespectful. And that’s all I’ll say.
Now, let’s get to the important thing. We must, must, must get these interest rates lowered. It’s really putting a drag on the flooring industry. People aren’t relocating. If they are in 3% mortgages or have no mortgages, they aren’t putting themselves into a 6.5% or 7% mortgage. The ironic thing is that number is historically fine. People were well into double digit rates in the ’70s and ’80s. Many people were simply spoiled by the 3% rates over the last few years.
To put things in perspective, as of 2022, 38.5% of homeowners had no mortgages. Many of the homeowners without a mortgage are baby boomers who refinanced their loans when interest rates were low. Of the remaining 61.5%, close to 80% have an interest rate below 5% while 60% have a rate below 4%, according to Redfin. For there to be significant movement in the housing market, we need to get the rates down to 5.5%, at most. It seems like the only significant housing activity right now are the boomers who are downsizing and buying homes for cash.
What about people who are staying put and remodeling? Because traditionally when people don’t move, they remodel. Interest rates are impacting them, too, because although they have significant equity in their homes, these loans are currently in the 8.5% to 10% range depending on the credit score. Many people remodel their homes with home equity loans, and flooring falls into this category.
At the same time, we will also need to somehow get everyday prices down. Mind you, I did not say get inflation down. You can get inflation to the target 2%, but the prices at the grocery store are still significantly higher than they were four years ago. How do we do this? If I knew I would be your next President.
Inflation is impacting our lower-end to mid-range consumer, who is postponing her flooring purchase because of the pressure on disposable income. Don’t take my word for it. Ask any retailer or manufacturer. The activity is at the higher end because those consumers are less impacted by inflation. Most NFA retailers with whom I spoke at their recent conference in Washington, D.C., said they are seeing fewer customers but bigger tickets. I also talked to manufacturing executives who validated this sentiment. Mohawk’s Karastan business is robust. Masland and Fabrica are the shining stars for Dixie.
With all this said, I am bullish on 2025, 2026 and into 2027. So are NFA retailers. Many told me the first quarter of 2025 may be a bit sluggish as we build momentum, but from then on the expectation is that business accelerates as the year progresses. That’s good news.
Meantime, maybe I should run for President. I wouldn’t get any votes, but you know my campaign would be interesting. And the other thing? I won’t lie.
