Industry Research
Renovation Barometer
Remodeling and Design Firms Optimistic for 1st-Quarter 2020
The Q1 Houzz Renovation Barometer reveals positive sentiment overall, despite economic and industry concerns
Firms in the residential remodeling industry are demonstrating strong confidence in the market for the next three months, new data from Houzz reveal, similar to their sentiment at the start of last year.
“Small businesses in the construction sector and architectural and design sector are heading into 2020 on a positive note, with expectations in line with last year and project backlogs already a few days longer than three months ago,” said Nino Sitchinava, Houzz principal economist.
“Small businesses in the construction sector and architectural and design sector are heading into 2020 on a positive note, with expectations in line with last year and project backlogs already a few days longer than three months ago,” said Nino Sitchinava, Houzz principal economist.
A score higher than 50 indicates that more firms reported increases than decreases in their business expectations.
Construction Firms
1. Expectations for business activity held steady. Build-only remodelers and design-build remodelers reported positive expectations for business activity going into the first quarter of 2020. Their positive sentiments kept the Expected Business Activity Indicator (one component of the Barometer) for construction at 74, flat compared with the start of the fourth quarter of 2019. This is the result of stable expectations both for inquiries from would-be clients and for new committed projects.
Compared with a year ago, the Expected Business Activity Indicator for construction firms is down 1 point, meaning that year-over-year sentiment is slightly more negative.
The Expected Business Activity Indicator is based on survey questions that asked businesses to report whether they expected the number of project inquiries and new projects to increase, decrease or be unchanged in the coming three months compared with the prior three months. A score higher than 50 indicates that more firms expected increases than decreases. Therefore, this part of the Barometer indicates that at the start of first-quarter 2020, business activity expectations for construction firms remain strong.
Construction Firms
1. Expectations for business activity held steady. Build-only remodelers and design-build remodelers reported positive expectations for business activity going into the first quarter of 2020. Their positive sentiments kept the Expected Business Activity Indicator (one component of the Barometer) for construction at 74, flat compared with the start of the fourth quarter of 2019. This is the result of stable expectations both for inquiries from would-be clients and for new committed projects.
Compared with a year ago, the Expected Business Activity Indicator for construction firms is down 1 point, meaning that year-over-year sentiment is slightly more negative.
The Expected Business Activity Indicator is based on survey questions that asked businesses to report whether they expected the number of project inquiries and new projects to increase, decrease or be unchanged in the coming three months compared with the prior three months. A score higher than 50 indicates that more firms expected increases than decreases. Therefore, this part of the Barometer indicates that at the start of first-quarter 2020, business activity expectations for construction firms remain strong.
2. Project wait times rose nationally. Construction businesses that are focused on remodeling reported that wait times before they can take on a midsize project from a new client now average 5.4 weeks, up 0.2 week from reported wait times at the start of the previous quarter.
One year ago, the national average wait time was 6.7 weeks, meaning the average wait time has dropped by 1.3 weeks. This quarter’s wait times are the third-shortest in two years.
Among construction firms, design-build remodelers have the longest average wait time before they can take on a midsize project: 5.9 weeks, down from 6.3 weeks at the start of the prior quarter. Wait times for build-only remodelers average 5 weeks, up from 4.2 weeks at the start of the previous quarter.
One year ago, the national average wait time was 6.7 weeks, meaning the average wait time has dropped by 1.3 weeks. This quarter’s wait times are the third-shortest in two years.
Among construction firms, design-build remodelers have the longest average wait time before they can take on a midsize project: 5.9 weeks, down from 6.3 weeks at the start of the prior quarter. Wait times for build-only remodelers average 5 weeks, up from 4.2 weeks at the start of the previous quarter.
Of course, backlogs vary significantly by region, as this map shows. The East South Central division of the U.S. (Alabama, Kentucky, Mississippi, Tennessee) has the shortest average wait time (3.4 weeks), while the Pacific division (California, Hawaii, Oregon, Washington) has the longest (6.6 weeks) among the nine geographic divisions as defined by the U.S. Census.
A score higher than 50 indicates that more firms reported increases than decreases in their recent business activity.
3. Recent business activity rose. An uptick in new-project inquiries and new committed projects in October, November and December lifted the Recent Business Activity Indicator of the Barometer to 65 for construction firms, up 2 points from 63 the previous quarter. However, relative to a year ago, this indicator is down 5 points.
The Recent Business Activity component looks at actual activity over the previous three months. In contrast with the Expected Business Activity and Project Backlog indicators, which look forward in time, the Recent Business Activity Indicator looks back. It’s based on survey questions that ask businesses to report whether they observed the actual number of project inquiries and new committed projects increasing, decreasing or staying the same in the previous three months relative to the three months before that.
3. Recent business activity rose. An uptick in new-project inquiries and new committed projects in October, November and December lifted the Recent Business Activity Indicator of the Barometer to 65 for construction firms, up 2 points from 63 the previous quarter. However, relative to a year ago, this indicator is down 5 points.
The Recent Business Activity component looks at actual activity over the previous three months. In contrast with the Expected Business Activity and Project Backlog indicators, which look forward in time, the Recent Business Activity Indicator looks back. It’s based on survey questions that ask businesses to report whether they observed the actual number of project inquiries and new committed projects increasing, decreasing or staying the same in the previous three months relative to the three months before that.
Architectural and Design Services Firms
1. Business activity expectations rose slightly. Architects and interior designers reported slightly higher expectations for new business activity for the first quarter of 2020 compared with the start of the previous quarter. Their score of 68 for the Expected Business Activity Indicator shows that more firms are expecting increases than are expecting decreases. This score is up 1 point from the start of Q4 2019.
This score is also up 3 points from the same period a year ago.
1. Business activity expectations rose slightly. Architects and interior designers reported slightly higher expectations for new business activity for the first quarter of 2020 compared with the start of the previous quarter. Their score of 68 for the Expected Business Activity Indicator shows that more firms are expecting increases than are expecting decreases. This score is up 1 point from the start of Q4 2019.
This score is also up 3 points from the same period a year ago.
2. Wait times rose nationally. The Project Backlog Indicator for architectural and design firms rose to an average of 4.6 weeks nationally at the start of the first quarter of 2020, an increase of 0.5 week from the start of the last quarter of 2019.
Compared with a year ago, when wait times were 4.7 weeks, wait times are slightly down.
Taking a closer look by professional type, architects have shorter wait times to take on a new midsize project (4.2 weeks, flat compared with the previous three months) than do interior designers (5.2 weeks, up 1.4 weeks relative to the start of the previous three months).
Compared with a year ago, when wait times were 4.7 weeks, wait times are slightly down.
Taking a closer look by professional type, architects have shorter wait times to take on a new midsize project (4.2 weeks, flat compared with the previous three months) than do interior designers (5.2 weeks, up 1.4 weeks relative to the start of the previous three months).
Again, backlogs vary significantly by region, as this map shows. The South Atlantic division of the U.S. (Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia) has the shortest average wait time (4 weeks), while the Mountain division (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming) has the longest (5.8 weeks).
3. Recent business activity was up. The score related to recent project inquiries and new committed projects in October, November and December rose to 62, a 5-point increase from the prior three months. Relative to the same period a year ago, this indicator is down 3 points.
The Houzz Renovation Barometer is based on a quarterly online survey sent to a national panel of U.S. businesses with profiles on Houzz. The Barometer includes three components: Expected Business Activity, Recent Business Activity and Project Backlog (or wait times). Expectations and business activity data are smoothed out to allow for predictable seasonal fluctuations, while wait-time data are not.
The 2020 Q1 Houzz Renovation Barometer garnered responses from 1,484 firms and was fielded from Dec. 29 through Jan. 10.
If you would like to offer your insights on market conditions in your area by joining the Barometer panel, please click here.
Read more Barometer reports
Tell us: How does this report compare with your firm’s experiences? Please share in the Comments.
The Houzz Renovation Barometer is based on a quarterly online survey sent to a national panel of U.S. businesses with profiles on Houzz. The Barometer includes three components: Expected Business Activity, Recent Business Activity and Project Backlog (or wait times). Expectations and business activity data are smoothed out to allow for predictable seasonal fluctuations, while wait-time data are not.
The 2020 Q1 Houzz Renovation Barometer garnered responses from 1,484 firms and was fielded from Dec. 29 through Jan. 10.
If you would like to offer your insights on market conditions in your area by joining the Barometer panel, please click here.
Read more Barometer reports
Tell us: How does this report compare with your firm’s experiences? Please share in the Comments.
“Given the significant delays in 2019 due to weather, among other factors, businesses are optimistic about projects spilling over into the first half of 2020,” Sitchinava says. “Economic and political uncertainty, high product and material costs and shortages of skilled labor continue to be the top cited concerns for 2020.”
Read on to learn what remodeling industry firms had to say about current business conditions. We’ll first look at construction companies and then at firms in the architectural and design services areas. We’ll start with what these firms expect for the next three months, then look at their project wait times, and finally at their business activity over the previous three months.