Advancements in technology and an increased awareness of what quality illumination can do for the look and value of a home are factors just beginning to nudge lighting to a top spot on home buyers’ list of priorities. Nowhere is this more evident than in the construction industry; contractors and builders load their projects with the latest in decorative custom amenities to meet their customers’ every whim and to make a bigger sale. While the housing market has seen a dip in recent years, lighting showrooms can still benefit from cooperating with these builders, and given economists’ predictions for the coming years, they’d be wise to get in now.
Home Building: An Economic Outlook for 2007
According to the National Assn. of Home Builders (NAHB), 2006 housing starts dropped 12.5 percent from 2005 and are expected to drop another 13.2 percent in 2007. Though the housing sector has substantially cooled according to the Federal Reserve, Stephen Melman, Director of Economic Services for NAHB, is confident that the residential market will begin to improve by the second half of 2007.
“All the forward-looking indicators suggest there will be some sort of stabilization in home buyer demand,” Melman says. “So, there should be an improvement in sales; that would be the first step in turning things around for the home builder sector.”
The second step is absorbing a sufficient amount of the inventory—homes already on the market that have not yet been sold. “Once that’s done, actual housing starts would increase because of an increase in demand,” Melman says. “[Right now] the inventory overhang is still high, and the inventory to sales ratio is still much higher than it was a year and a half ago. And that needs to go down in order for there to be an increase in actual starts.”
Much of the overhang is likely the result of a booming speculator presence in the housing industry that reached new heights from 2003-2005. During that time, investors saturated the market in urban areas, buying up newly built condos with the intention of turning them around quickly and for a sizable profit. Once housing prices leveled, speculators lost interest and dumped their properties back into the market, creating an unparalleled surplus.
Despite the national slump, some areas of the country are experiencing an unusually high demand for new housing. “Texas and parts of the South have done well, in part because of Katrina-driven migration,” Melman says. “Efforts to rebuild the Gulf Coast will stimulate a lot of housing starts, especially in the rental market.”
With new building projects burgeoning in areas of the South and prices stabilizing throughout the country, Melman postulates that the current correction will be half as long as and far less severe than the one that occurred in the early ’90s, and although prices are predicted to remain flat, there is an up-turn in sight.
“I guess you could say that we’ve restored some balance in that respect,” Melman says. “And at some point [during the next two years], we would expect that demand [for new homes] would pick up and, once again, there’d be some traction.”
Lighting Gains Ground
For the lighting industry, the prospect of future growth in
But even now, as the market corrects itself after an unusual high, catering to builders can prove a substantial profit center for lighting showrooms, says Tom Korecki, Corporate Marketing Director of Estridge, a home building company in Carmel, IN. “A builder’s reputation is hugely important, and the things that a builder includes in his home help build that reputation,” Korecki says. “So, builders are looking for a wide variety of high-quality product, and that includes lighting.”
The NAHB’s most recent estimates of the average new home project budget, published in 2002, reveal that builders spend about 0.8 percent of their budget on lighting fixtures, as opposed to 4.3 percent for cabinets and countertops and another 4.3 percent for tiles and carpet.
“These are rough estimates, and I don’t think the percentages are all that different from what they are today,” NAHB’s Melman says. “That said, in talking to architects and builders more recently, there’s a lot of new technology emerging, so there’s going to be a [greater focus] on lighting put into new homes. That 0.8 percent has the potential to increase.”
Other trends, such as open floor plans and super-customized interiors, are also fueling the importance of lighting in building projects. To satisfy increasingly savvy customers and to make their projects more attractive to buyers during the current housing slump, builders have been loading up new homes with non-price sales incentives, such as upgraded designer kitchens and bathrooms, which drives the need for trend-focused and higher-quality lighting fixtures to complete the custom look.
As a result, many manufacturers do not differentiate between their decorative product and a “builder line.” Over the last decade, Sea Gull Lighting has built successful relationships with builders, offering them the same trend-focused designs it offers its showroom clientele.
“To just [isolate] a section of our line and say it’s our builder line shortchanges what we can offer someone with the depth of our full line,” says Jody De Vine, Director of Brand & Channel Marketing at Sea Gull Lighting. “Each builder in each community has different needs, and many are looking for increased curb appeal and differentiation from their competitors. The lighting package can certainly mean the difference in the wow factor of that new home, and a savvy builder recognizes that.”
Thomas Lighting employs a similar approach. “[We] develop our product line with regard to price point, finish and style to meet the needs of all types of residential [customers]; most of these products are utilized both in the showroom market and in builder packages,” says Gina Rueff, Thomas Lighting’s Director of Marketing. “There are large national builders that use some of our higher-end products to produce a well-rounded lighting package for their homes, and there are builders that focus primarily on a price point that gets the homeowner the bare minimum.”
Even for manufacturers like Savoy House and Kichler, which do designate a specific builder line, stylish, decorative options in a range of price points are key to keeping today’s trend-hungry builders happy. Kichler’s Builder Plus program, which debuted about two years ago, allows builders to choose from a wide selection of complete decorative lighting families that are a far stride from the typically bland builder products of the past.
Lighting showrooms catering to builders in California must not only offer diverse product; they must also stock appropriate product. The state’s Title 24 mandates the use of a certain percentage of energy-efficient lighting in new construction, so lighting showrooms that offer Energy Star™-rated products and code-compliant ceiling fans—now widely available from many manufacturers—will be a valuable resource for builders.
Working With Builders
Lighting showrooms can adopt a number of methods to facilitate
Showrooms can also take it a step further and set up an area of the store dedicated to builder product.
“It comes down to merchandising,” says Sea Gull Lighting’s De Vine. “Create a vignette or an area that really shows off the product. It really helps to steer that builder to that product and wow them a little more, versus just going out of a catalog.”
Another great way to work with builders is to partner on show-home projects, says Todd Roy, Builder Market Manager for Progress Lighting. “Models that builders outfit to the max with options create opportunities for the servicing showroom to supply bolt-on products, such as furniture, portable lamps and accessories,” Roy says. “Additionally, smart showrooms will capitalize on [these programs] to encourage the new home buyer to visit the servicing showroom.”
In the end, the lighting showroom-builder relationship comes down to recognizing the benefits of working together and taking steps to build and kindle relationships that ultimately make the home-buying experience easier for the customer.