The U.S. housing recovery bodes well for containerized imports of furniture and other home goods this year.
Furniture accounts for 10 percent of U.S. containerized shipments, making it an important bellwether for container shipping. “Furniture imports are highly correlated with the housing market. If housing continues to recover, furniture imports will continue to increase,” JOC Economist Mario O. Moreno says.
Bank of America-Merrill Lynch estimates that housing-related shipments such as furniture, building materials, appliances and power tools account for 25 percent of eastbound trans-Pacific container volumes.
Recent data show housing is continuing its gradual recovery from the real estate bust. Sales of existing U.S. homes reached a five-year high in 2012, according to the National Association of Realtors. Housing starts rose 28 percent, reaching their highest level since 2008. It took a median of 4.6 months for new houses to sell, compared with 6.7 months at the end of 2011 and 14.4 months in March 2010. Average house prices rose 7.7 percent.
Those numbers, however, must be kept in perspective. Last year’s 367,000 home sales were above 2011’s record low of 306,000 but still were the third-lowest since 1963. Last year’s 780,000 housing starts were the fourth lowest since 1946. Housing starts remained far below the 1.5 million annual average of the last four decades, let alone the 2006 peak of 2.2 million.
But the trend is upward. IHS Global Insight forecasts housing sales will rise to 464,000 this year, though they aren’t expected to rise to normal levels of about 800,000 until 2015. Builder confidence measured by the National Association of Home Builders is at a post-recession high. Mortgage rates are at historic lows for those who can qualify.
“We’re certainly moving in the right direction and seem to be gaining momentum,” said Jerry Epperson, managing director of Mann, Armistead & Epperson, a Richmond, Va., firm that follows the furniture industry. “When housing collapsed, our business declined 20 percent. I think we’re about halfway back from where we were.”
When people change houses or apartments, they often buy furniture or other furnishings. The recession and housing bust slowed population mobility. Reduced home equity cooled demand for “move-up” purchases of larger homes. Tighter lending rules squeezed many potential buyers out of the market. Weak job markets slowed rates of population movement.
Between 2005 and 2010, 35.4 percent of Americans changed residences, Census Bureau data show. That was the lowest rate for any five years on record, and compared with a 45.9 percent mobility rate between 2000 and 2005.
The recession’s impact on furniture and home goods was immediate and severe. Epperson said the strongest category of furniture sales during the recession were “things that had to be replaced, such as upholstered furniture, which wears out.” Sales of wood furniture such as dining tables and bed frames fell sharply.
That trend is poised to change. Containerized furniture imports rose for the 16th consecutive month in October and were up 12.2 percent through the first three quarters of 2012, according to JOC sister company PIERS.
Increased housing activity will boost sales of furniture, particularly wooden products that dominate imports, Epperson said. “People cannot change bedroom furniture until they change a house and add a bedroom,” he said.
Much U.S. furniture production shifted to China a decade ago. Furniture imports from China have risen consistently despite the 2004 imposition of anti-dumping duties after a coalition of U.S. furniture makers and unions petitioned the U.S. international Trade Commission.
Growth in Asian production has shifted southward from China, which remains the dominant sourcing country, to Vietnam, Indonesia and neighboring countries where costs are lower, labor is plentiful and transportation links are good. “The only question is not whether imports will grow, but where the imports will come from,” Epperson said.
According to the U.S. Commerce Department, U.S. wood household furniture imports from China totaled $3.8 billion in 2011, representing a compounded annual growth rate of 3.8 percent, while imports from Vietnam jumped 42.2 percent to more than $1.4 billion. China’s market share slipped to 44.7 percent from 47.5 percent in 2007.
Wood furniture represents about 70 percent of U.S. household furniture imports, which totaled $18 billion in 2011. Total imports rose at a compounded annual growth rate of 4 percent over the last decade, with China’s share rising 8.9 percent to nearly $10.9 billion.
Vietnam has ranked as the No. 2 U.S. import source second since leapfrogging Canada in 2009. Vietnamese household furniture shipments to the U.S. totaled $1.6 billion in 2011, a 41.6 percent compounded annual growth rate since 2002, according to Commerce figures.
Although Asia remains the dominant supplier of U.S. furniture, there’s been some near-sourcing to take advantage of opportunities for transportation savings and quick resupply. During the last five years, U.S.-based La-Z-Boy, Ethan Allen and Furniture Brands International have opened Mexican factories to produce cut-and-sewn fabrics for their U.S. upholstered-furniture plants, Epperson noted.
“This isn’t changing from imported to being domestic,” he said, “but it is changing the source.”