ITR Economics' senior forecaster Connor Lokar delivered an optimistic outlook for flooring retailers at CCA Global Retail Group's winter convention,  predicting a recovery in 2025-2026 after two challenging years in the sector.

The flooring industry, which has weathered significant headwinds since 2023, appears poised for a rebound as key market indicators show signs of improvement. Notably, existing home sales, a crucial flooring retail driver, have risen for the first time since early 2022. However, the market is still recovering from a substantial decline in transaction volume, dropping from 6.2 million homes in 2021 to approximately 4 million in recent months.

"All the market fundamentals are in a better position today than they were last year," Lokar noted, though he cautioned that the upcoming recovery won't match the explosive growth seen in 2020-2021. The absence of direct consumer stimulus and historically low mortgage rates means retailers should expect more modest, steady growth.

"Is this going to be second half of 2020, 2021 kicking-doors-down-type growth?" Lokar asked. "No, it's not going to be that good. We don't have direct-to-consumer stimulus. We don't have 3%, 4% mortgage rates."

The ITR Remodeling Market Index, a key indicator for the industry, has shown promising signs of recovery after a sharp decline in previous years. This upturn, combined with rising consumer incomes and increasing home sales, suggests improved conditions for flooring retailers in the coming years.

Despite these positive indicators, the industry faces ongoing challenges. Mortgage rates are expected to remain in the high 6% to low 7% range through 2025, and inflation pressures persist. Lokar emphasized that businesses should use this recovery period to strengthen their positions, particularly in staffing and infrastructure, to meet expected increased customer traffic.

Looking further ahead, Lokar addressed potential economic challenges in the early 2030s due to demographic shifts, advising businesses to use the next three to five years to build resilient business models and reduce debt loads. However, he maintained that the U.S. market remains the strongest position globally for business growth.

For flooring retailers, the forecast suggests a period of gradual recovery ahead, with opportunities for growth tempered by ongoing cost pressures and the need for strategic business planning.