Home brands target renters as ownership remains out of reach for many

Today, the median price of homes sold in the U.S. is about $405,000. That’s $100,000 (or 30%) more than it was 10 years ago, according to the U.S. Census Bureau and Department of Housing and Urban Development data, per the Federal Reserve Bank of St. Louis. The average mortgage rate remains elevated at about 6%, making it difficult for some people to get a loan with monthly payments they can afford. That rate is down a bit from its 2023 high of almost 8% but still far above the sub-3% rates that defined the post-Covid housing boom in 2020 and 2021.

Retail executives in the home space, as well as industry analysts, told Modern Retail 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, regardless of age range or income class, given the uncertainty in the economy and higher housing costs that eat up household expenses.

“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 IKEA U.S. “Homebuying is an occasion that drives a great need, but there are many needs across a lifetime and life stages.”

A changing home consumer landscape

Home brands have seen their customer base change dramatically in recent years, in both age and behavior.

Hashemi said IKEA has been tracking consumer sentiment around the American Dream for about the last 10 years, and found that younger people value stability and full life experiences more than home ownership.

“Attitudes around home ownership amongst the younger generation are evolving a lot,” she said. “That’s not necessarily the end destination.”

Additionally, Hashemi 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.”

Lee Mayer, CEO of Havenly Brands, a portfolio of interior design businesses and home furnishing brands that has historically catered to homeowners, said the company’s median customer has gotten about eight years older over the last decade. Additionally, she said the company has more renters in its customer base.

She said Havenly has found that people between the ages of 27 and 35 are more often living in apartments than in the past, and that has reflected in the company’s sales. “Younger buyers are no longer buying some of the more premium products that are a little more permanent, because they are less likely to buy a home,” she said.

Havenly brands’ Interior Define (which sells custom furniture), Citizenry and St. Frank brands used to have more younger customers, but their customers have gotten older, according to Mayer. She said this is likely because custom furniture doesn’t make as much sense for renters, and Citizenry and St. Frank are a bit more expensive.

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 in customers waiting for deals.

“People still want their home to look nice, but they don’t want to spend thousands of dollars,” Fernández said. “They might just buy some new pillows, or some new bedding, some candles, decor types of things for seasonal; kitchen products are still doing well.”

Fernández attributes the challenges in the housing market to recent M&A moves and financial troubles in the space. These include The Home Depot buying SRS Distribution, a distribution company for professional roofers, landscapers and pool contractors in 2024; as well as recent bankruptcies of At Home and The Container Store over the past couple of years. (The Container Store has since exited bankruptcy.)

“You have low demand and a higher cost to operate,” Fernández said. “If you’re not in good financial health, it’s just a tough operating environment for these companies.”

Even high-end homebuyers have been more focused on staying within a set budget, said Julian Buckner, founder and CEO of Vesta, a luxury home staging and interior design firm. Buckner said he has also seen a roughly 300% 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. They may rent the furniture for a year or two before tackling their dream interior design project, he said.

“We always encourage clients to [rent furniture initially], because you know you never know how you’re going to live in the property until you’ve done it for a little bit,” he said, while still calling the influx in furniture rental demand a “byproduct of increased prices.”

How brands are changing their tune

As a result of how their customers are shifting their buying behavior, brands are adopting new approaches to their strategies for marketing and assortment.

IKEA has been focusing its marketing around positioning itself as a partner with customers in achieving whatever their home goals may be, including moving off to college, renting an apartment or finally buying their first home. Hashemi said IKEA tries to position itself as affordable, accessible and relevant to people in different home situations, like multigenerational living. For example, she said the company has started introducing drill-free products to its lineup to meet the needs of apartment renters.

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.

The renter demographic has also informed IKEA’s expansion strategy. The brand is bringing small-format stores into areas with a higher density of renters, like in the city of Dallas or near colleges and universities. The company is also opening spaces inside Best Buy stores to be closer to more customers. It additionally has done pop-ups in places such as Union Square in New York and plans to open a SoHo store within the next year.

“Our expertise in smaller-space living, storage and organization solutions, etc., really makes it an ideal recipe for some of these markets that have renters,” Hashemi said. “It’s important that we are easy for customers to reach.”

Havenly’s Mayer said the company acquired modular furniture brand Burrow in 2024 in order to have a brand in its portfolio that caters largely to a renter demographic. The furniture, shipped in boxes, is “very popular with renters, because in New York, you can fit it into service elevators,” Mayer said. “It gets delivered quickly, and it looks good, but then you can grow with it. You can start small, and then add more pieces if you move to a bigger place or a bigger apartment.”

Mayer said the company has also been testing new marketing messages across its brands that acknowledge not only that first-time homeownership is difficult, but also that upgrades are more challenging than they used to be.

“It’s also about people that, normally, at this point, would be buying a new or a larger home,” Mayer said. “They can’t move, either, so we’re trying messages like, ‘Don’t love your current place? Redo it with Havenly,’ and ‘Make it feel like more than a starter home with Havenly.’”

To reach the older demographic that is still able to buy homes, Havenly is also leaning into selling through interior designers and print catalogs. Both, Mayer said, give the brands credibility with a more affluent audience of homeowners.

At the higher end of the housing market, Buckner said Vesta has developed a fixed pricing model, in contrast with interior designers who charge hourly fees and take an indefinite amount of time. He said that, for people stretching their budgets, it has become important to stress that the company can tell them exactly what they’re going to spend and how long the project will take.

“We’ve created a design product that provides a much higher level of certainty around the price of designing and furnishing a home,” Buckner said. “It’s highly valued by folks who don’t want to sign up for that open-ended project, may be more budget-oriented or are stretched more [financially] on the house.”

Dwindling hope for a housing recovery

The war in Iran is further fueling uncertainty in the housing market, given headlines of how it is increasing mortgage rates, said Michael Gunther, vp of research and market Intelligence at Consumer Edge. Mortgage rates are influenced by the yield on the 10-year treasury note, which has risen amid investor uncertainty, according to The New York Times.

Gunther’s firm tracks consumer credit and debit card data to see at which retailers and in which categories consumers are spending. Because of the continued volatility in the housing market, he said, home furnishing has seen some of the most deceleration of any category over the past few months. Gunther has also found that smaller-ticket items, like decor, are selling better than higher-priced items, like mattresses. In the fourth quarter, decor and kitchen were the only categories within home that saw positive growth, Gunther said.

“There was a hope of an inflection point, but obviously, rising mortgage rates and uncertainty tend to pressure this particular area,” Gunther said. “Buying a house is obviously such a ridiculously large expenditure that if there’s uncertainty, people pause.”

Fernández said there was hope that, as mortgage rates came down, the housing market would improve, but rates haven’t come down enough to spur demand.

“With mortgage rates staying high and home prices not really coming down — some markets maybe, but not nationwide — then it’s not clear that this housing recovery is going to happen anytime soon,” Fernández said. “It looks like it’s going to be, at least for now, a very gradual process, and it’s going to be a headwind for longer than we would have thought.”

Havenly Brands bought Burrow to have durability if the housing market continues to be a challenge, Mayer said, but she is still optimistic that interest rates and prices will go down, and that people still eventually want to own their own home.

“My thought is, it’ll catch up,” Mayer said. “In the meantime, what we’re doing is thinking about strategy and changing who we market to, and we now own a brand that hopefully helps to target that consumer with products they might need.”