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Cinde W. Ingram

Housing slowdown causing mixed results

Although home builder confidence rose and fell sharply over the first months of 2007, the long-anticipated housing slowdown isn't all bad news for the outdoor furniture industry.

Smaller homes and an abundance of outdoor rooms are among this year's hot design trends, according to a panel of architects and interior designers at the International Builders Show in Orlando. Outdoor living spaces are no longer limited to warm climates but are being created in colder climes for three-season use, said Kathy Browning of Virginia Beach, Va.-based Design Consultants.

After a spike in January home sales, the construction market was bullish about sales expectations for the next six months. An index of builder sentiment compiled by the National Association of Home Builders and Wells Fargo Bank rose seven points and jumped over the threshold number of 50 for the first time since last June. But two weeks after that rosy outlook, sales of new homes dived by more than 16% in February.

While Haverty's attributed a 10% decline in February sales at its 121 stores to a general softening in demand due to the slowdown in home sales, furniture analyst Jerry Epperson said outdoor furniture retailers should focus on areas near their stores.

"The housing market is always local," Epperson said. "It makes no difference to a retailer what the national housing market is doing. We see time and time again that this city or that city will just be knocking the cover off the ball even though nationwide sales are way down. That's going to be particularly true over the next 10-15 years because we're in the middle of a major migration. People from the Northeast in particular are moving to the South. It's going to mean demand for homes in the South and a glut of homes in the North."

Epperson added he thinks the outdoor furniture business will be more stable because the prices of most riverfront or recreational property have held up better than in the core cities or their suburbs.

"The other thing we caution people about housing is that the biggest growth market for housing is with young people. They need smaller homes and they are already reclaiming a lot of the neighborhoods of homes built in the '50s and '60s. These homes don't have a lot of the features of the homes that were built in the '80s, the '90s and this decade, so you're looking at smaller homes. When you look at these housing numbers, we could see a major rebound in the number of homes sold but the total square footage might be less."

"Housing did have a modest uptick in the 4th quarter," Epperson said. "What most people today are concerned (about) are their values being maintained — not just because of their personal wealth but because if they owe a mortgage on it, they want to make sure the value covers their mortgage. If you really look at the mix of homes, the glut is in the condo market. While people in condos do have outdoor space to decorate, I don't think they are being as much impacted as the single-family home market."

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