With the housing market continuing to shrink, more people are renting. Here’s what it means for builders, contractors and product makers.
With the typical age of first-time homebuyers at an all-time high of 40 last year and the share of first-time buyers contracting by 50 percent since 2007, it continues to mean more Americans are ending up renting.
For home builders, contractors and companies making home products, the rental trend means very different dynamics in the types of goods and services they offer. The online newsletter Modern Retail recently reported that brands have had to focus more on products that are ideal for renters and change their marketing tactics to appeal to that demographic. They’re also generally catering to people on tighter budgets, it said, regardless of age range or income class, given the uncertainty in the economy and higher housing costs that eat up household expenses. It’s likely to mean lower-cost materials used in construction since renters will not be as concerned with the longer-term quality that buyers might be.
IKEA, the giant home furnishings retailer which also offers kitchen and bath remodels, is one company trying to address the changing marketplace. “We have to work with what the temperature is, of the housing market, to be able to meet the customer in the way that they need to be met, offer the right solutions and be affordable,” said Shideh Hashemi, chief marketing officer for the company.
Hashemi said IKEA has been tracking consumer sentiment for about the last 10 years, and found that younger people value stability and full life experiences more than home ownership.
She said the retailer has seen an increase in financing usage over the past couple of years, and that people may skip a bathroom refresh to instead just change out their vanity, for example. Or, instead of a kitchen remodel, they may just change out the countertops. “People are very budget-oriented, so affordability is really important.”
Retailers generally have been focusing less on big-ticket categories like large furniture or appliances, according to Cristina Fernández, managing director and senior research analyst at Telsey Group. Fernández covers home furnishings and other sectors. She said home retailers have been centering more on decor and accessories, as well as more promotional activity, to lure customers waiting for deals. “People still want their home to look nice, but they don’t want to spend thousands of dollars.”
Even high-end homebuyers have been more focused on staying within a set budget, Julian Buckner, founder and CEO of Vesta, a luxury home staging and interior design firm, told Modern Retail. Buckner said he has also seen a roughly 300 percent increase in furniture rentals over the past couple of years as people have stretched their budgets to buy a home and try to scale back furnishing costs.
And whether it’s homeowners or renters, some things never change. IKEA has long specialized in storage and organization products geared toward smaller spaces. “When we look at consumer needs, dealing with clutter is still the No. 1 issue that people struggle with,” Hashemi said.
