Trends In New Home Construction: As carpet retreats to bedrooms, hard surfaces step up - Mar 2018

By Darius Helm

The single-family new home market is in the midst of a long and steady recovery from its collapse a decade ago. Current tight supply of existing homes on the market is helping drive new construction, and sustained demand is expected for several years. The 55+ market, which almost perfectly captures the Baby Boomers (now aged 53 to 72), is showing steady growth, stronger in single-family than multifamily, according to the latest report from the National Association of Home Builders.

However, the largest buying group today is the first-time buyer. Production builders are moving quickly to serve the growing demand. D.R. Horton has even created a division, Express Homes, offering affordable homes to first-time homeowners. Express, which was launched four years ago, already makes up a quarter of D.R. Horton’s total home sales.

It’s worth noting that, when it comes to installed elements like flooring, while second-time and third-time buyers focus on issues like durability, maintenance and added value to the home, first-time buyers are largely motivated by affordability. And the production builders are operating on narrow margins, so their eyes are also firmly fixed on costs.

FLOORING TRENDS
Production builders are working on spec, so they can’t take a lot of risks, and that makes for conservative flooring choices. So while products like LVT and rigid LVT are trending all across the market, they’re trending more conservatively in the builder business-though convincing wood looks and textures have helped generate interest. Builders need to balance risk with healthy margins. Not so in the multifamily market, which operates on even narrower margins but also has higher turnover and renovation rates, i.e. lower risk. In the multifamily market, LVT is rapidly taking share from every flooring category.

The strongest flooring trend in single-family home construction over the last couple of decades has been carpet ceding share of the home to hard surface flooring. Carpet has retreated to the upstairs-the bedrooms and often the corridor, keeping things quiet and soft, while the living space is most often hardwood, with ceramic tile in the bathrooms. Hardwood is the flooring of choice for homeowners, more so for the older generations or those buying their second or third home. Together, carpet and hardwood account for the majority of the flooring square footage in new homes, though laminate, LVT and even rigid LVT are steadily taking share.

In terms of hardwood, solid wood is losing share to engineered, in large part because of slab construction, which is strongest in the South. Generally speaking, slab constructions require engineered flooring, since there’s no subfloor. However, there’s also a lot of slab construction in the West, but in those drier climates, engineered flooring can run into problems. In some of these regions, laminate flooring is a common alternative.

Manufacturers report that laminate is doing well in new single-family housing in many regions, not just the arid climates, replacing hardwood. But the advantage of LVT is that, because of its performance characteristics, most notably the fact that it’s a waterproof material, it can go into more areas than hardwood or laminate, like in basements and laundry rooms.

While carpet still has the second floor, one floorcovering category with nowhere left to retreat is sheet vinyl, which has fallen out of favor with consumers. That’s a shame for builders, because it’s the most affordable hard surface flooring and it performs well. It’s most commonly found in utilitarian areas, like laundry rooms. Not so much in kitchens these days.

The overall picture of a home is hard surface downstairs in the living space and carpet upstairs in the private space, though there are really three areas, the third being the functional spaces like bathrooms, laundry rooms and walk-in closets. The living space-also known as the aspirational space-is where the best furnishings go, often including hardwood floors. The private space is soft and quiet. And the functional space is performance-based.

From the perspective of the homebuyer, the flooring in the house can also be divided into two categories: permanent and upgradable. The hard surface flooring is permanent, while the upstairs carpet can be upgraded. There have been some questions about whether better quality carpet might be making its way into new single-family homes, since there’s less of it going in and the hard surface that’s taking share costs more. But it seems as though this is much more common in the remodel market, where homeowners tend to do a room at a time, rather than a whole floor.

In the production builder market, hard surface flooring is already eating into margins, so builders are not particularly inclined to seek out even more ways to make less money. If anything, they’re looking for ways to make up the difference-that’s why polyester carpet has been such a hit in the single-family and multifamily builder markets. Competitive pricing and consumer preference for hard surface flooring have made carpet even more affordable, making it a tempting option. In fact, the first-time buyer market in affordable housing could even help slow carpet’s marketshare slide.

Another trend worth watching is that houses have been getting smaller for the last few years, and so are lot sizes. And, of course, construction costs keep rising. Some builders have been compensating by building three-story homes. Also, while the open-concept living space is in high demand, there’s also some emerging demand for private areas. This could impact flooring choices. It will certainly impact design trends, like large-format planks and tiles.

LOOKING FORWARD
It’s likely that builders will increasingly lean toward LVT and rigid LVT in new home construction, as they gain confidence about LVT’s price/value equation versus hardwood, especially when you factor in reductions in prep time, acclimation and installation, durability and moisture resistance. It’s also likely that carpet won’t lose much more share. It’s a product that makes sense in the private areas of the home, and the price is right, even with upgrades.

Hardwood’s long-term outlook is more mixed. While it does add value to the home more than any other floorcovering, and while it’s a natural material, the performance characteristics of faux-wood products like LVT and rigid LVT are stronger-and at a lower cost-that it’s hard to resist.

Also, faux woods can convincingly deliver trendy looks that in hardwood would be well outside of many budgets. And our social media society is very focused on trends.

When it comes to homes, sites like Pinterest are all about décor items-products and treatments that improve the look and feel of the home. Also, it could be leading the next generation of homeowners to focus their expenditures more on these sorts of upgrades and less on, for instance, total square footage of the home.