State of the Industry:
Taking the Temperature of 2007

“I hadn’t done much with the place for the first few years,” explained Lawrence, “but when I became involved in a serious relationship, I wanted a space I’d be proud to bring someone home to, a space she’d appreciate and feel comfortable in, so I used that money to re-do my apartment.”

By his estimate Lawrence spent about $22,000 in 2005-2006, refinishing the floors, painting, new furniture, a few new tech toys (of course) and new window treatments for the ten custom-shaped windows in his top-floor brownstone unit. He chose custom wood blinds throughout, with lined panels for the bedroom and living room, and simple top treatments in the kitchen. He doesnÂ’t remember the exact total for that portion of his budget, but thinks it was in the seven- to nine-thousand dollar range.

“I remember being at bit surprised at the cost, to you tell you the truth, but then again, I’d never purchased custom window treatments, so the only thing I was comparing it to was Home Depot or maybe Pottery Barn,” said Lawrence. “But the furniture my decorator and I worked on turned out great, so I trusted her judgment as far as value and quality for the money.” Lawrence adds, “At that time, what was a thousand or so either way. Although to hear myself say that now sounds ridiculous.”

Lawrence wasn’t alone in either his spending habits or his mind set. A recent article in the New York Times cites a working paper by economist James Kennedy and Alan Greenspan, former Federal Reserve chairman, which includes data from 2004 through 2006 that show Americans tapping into about $840 billion a year through a combination of refinanced mortgages, home equity loans and residential home sales. These “withdrawals” contributed to approximately $310 billion a year in personal consumption, according to the same paper.

But in first half of this year, these withdrawals decreased an average of 15% as compared with the prior three-year average, with some regions dropping significantly more. And, the consumption driven by these withdrawals dropped by a much steeper rate, down about 25%, according to the same Kennedy/Greenspan data.

So while much of the media coverage of the housing bubble has focused on the collapse the sub-prime market, many in the design industry have realized for quite some time that the ripple effect of decreasing home values has the potential to cause some quite large waves.

“The depressed housing market has had significant impact on our industry in 2007,” states John Fitzgerald, the executive vice president of Comfortex Window Fashions. “And we expect the next 12 months will remain challenging as consumers are impacted by ever-rising oil prices, a sluggish stock market and a very soft housing market.”

At the time of publication, oil prices are at record levels and are expected to top $100 a barrel before the end of the year. Already these record costs have translated into substantial increases for home-heating fuels and gasoline. The steep rise in these prices strips many consumers of monies they would otherwise spend on discretionary items–clothes, electronics, dining and, of course, decorating.

Both the window treatment industry and the broader design industry are clearly linked to the housing market, but fortunately the news isn’t all doom and gloom. Rose Bower, product manager for ADO Corporation and who has experienced industry retrenchments before sees it this way: “When home prices are extremely high, as has been the case, it usually takes the homeowner 2-3 years after a new purchase to go in and decorate each room. Historically, in a slow housing market, many people who would have been looking to purchase, choose instead to redecorate their current surroundings.”

Several other industry pros echoed Bower’s opinion. “There is an opportunity to have a very successful year as there is still a huge remodeling and redecorating market,” states Joe Jankoski, vice president of corporate merchandising for Hunter Douglas. Others mention niche markets that can profitably be explored–green and eco-awareness is a largely untapped specialty in the window treatment field–others mentioned universal design, citing an aging, but still active baby boom generation; children’s rooms, given the recent sustained uptick in births, an echo-boom some call it; and, of course, there are still plenty of people with plenty of money.

According to the 11th Annual World Wealth Report from Merrill Lynch/Capgemini, there were approximately 3.2 million High Net Worth (HNW) individuals in the United States in 2006. This report includes all assets except the individualÂ’s primary residence, in order to factor out the effects of the housing bubble. A different research firm, TNS, using methodology* (see footnote), concluded the U.S. population of millionaires in 2006 to be 8.9 million. TNS also excludes primary residence value from its calculations. Either way, itÂ’s clear thereÂ’s money out there.

There are also always people who need to make a change in their home environment for various reasons, Duane Lawrence for example. Two years ago he redecorated for very personal reasons–and it worked. Lawrence recently returned from his honeymoon and is now sharing his wife’s larger two-bedroom apartment. He hired his decorator back to get his unit into selling condition, nothing major, a couple of thousand dollars, but he considers it money well spent. “I don’t want the space to look abandoned, even though I’ve taken quite a few pieces out. Just the way I did the first time, I look at her time and what I spend on her talents and investment in my future.”

For a look at the future–what 2008 holds in terms of new products & business predictions, watch for the second half of this article in the January 2008 issue of Window Fashions. WF