Industry Research
Renovation Barometer
Confidence in the Home Remodeling Market Returns
Firms are more optimistic than when the pandemic first hit, the Q3 Houzz Renovation Barometer shows
Firms in the residential remodeling industry have regained confidence in the market for the next three months, new data from Houzz show, as nearly all business indicators have returned to pre-pandemic levels.
“Confidence has returned to the home renovation and design industry, with many more businesses showing a positive outlook for 2020 than just a few months ago,” says Marine Sargsyan, Houzz senior economist.
“Confidence has returned to the home renovation and design industry, with many more businesses showing a positive outlook for 2020 than just a few months ago,” says Marine Sargsyan, Houzz senior economist.
A score higher than 50 indicates that more firms reported increases than decreases in their business expectations. Q2 2020 marked the first time since the Houzz Barometer began in 2015 that scores fell below 50.
Construction Firms
1. Expectations for business activity bounced back. Build-only remodelers and design-build remodelers reported recovered expectations for business activity going into the third quarter of 2020. Their positive sentiments lifted the Expected Business Activity Indicator (one component of the Barometer) 57 points, from an all-time low of 18 at the start of the second quarter to 75 at the start of the third quarter. This is slightly higher than expectations at the start of the year.
Expectations rose 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 up 5 points, meaning that sentiment is higher than it was at this time last year.
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 third-quarter 2020, business activity expectations for construction firms are much higher than they were three months earlier.
Construction Firms
1. Expectations for business activity bounced back. Build-only remodelers and design-build remodelers reported recovered expectations for business activity going into the third quarter of 2020. Their positive sentiments lifted the Expected Business Activity Indicator (one component of the Barometer) 57 points, from an all-time low of 18 at the start of the second quarter to 75 at the start of the third quarter. This is slightly higher than expectations at the start of the year.
Expectations rose 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 up 5 points, meaning that sentiment is higher than it was at this time last year.
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 third-quarter 2020, business activity expectations for construction firms are much higher than they were three months earlier.
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 6.2 weeks, up 0.8 week compared with the start of the previous quarter.
One year ago, the national average wait time was 4.9 weeks, meaning the average wait time has risen by 1.3 weeks year over year.
Among construction firms, design-build remodelers have the longest average wait time before they can take on a midsize project: 7 weeks, up 1.2 weeks from the start of the prior quarter. Wait times for build-only remodelers average 5.4 weeks, up 0.4 week compared with the start of the previous quarter.
One year ago, the national average wait time was 4.9 weeks, meaning the average wait time has risen by 1.3 weeks year over year.
Among construction firms, design-build remodelers have the longest average wait time before they can take on a midsize project: 7 weeks, up 1.2 weeks from the start of the prior quarter. Wait times for build-only remodelers average 5.4 weeks, up 0.4 week compared with the start of the previous quarter.
Of course, backlogs vary significantly by region, as this map shows. The West South Central division of the U.S. (Arkansas, Louisiana, Oklahoma, Texas) has the shortest average wait time (4.6 weeks), while the East North Central division (Illinois, Indiana, Michigan, Ohio, Wisconsin) has the longest (7.2 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 increased slightly. An increase in new project inquiries in April, May and June raised the Recent Business Activity Indicator of the Barometer to 49 for construction firms, up 1 point from the previous quarter. Relative to a year ago, this indicator is down 9 points.
While project inquiry activity was up in the past three months, new committed project activity was actually down over the same period.
The Recent Business Activity Indicator 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 increased slightly. An increase in new project inquiries in April, May and June raised the Recent Business Activity Indicator of the Barometer to 49 for construction firms, up 1 point from the previous quarter. Relative to a year ago, this indicator is down 9 points.
While project inquiry activity was up in the past three months, new committed project activity was actually down over the same period.
The Recent Business Activity Indicator 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 recovered. Architects and interior designers reported much higher expectations for new business activity for the third quarter of 2020 compared with the start of the previous quarter. Their score of 67 for the Expected Business Activity Indicator shows that more firms are expecting increases than are expecting decreases. The score is up 32 points from the start of Q2 2020.
Compared with the same period a year ago, this score is down 4 points.
Architects reported a 22-point increase in overall expectations, to 64, relative to the start of Q2 2020. Interior designers’ expectations rose more dramatically, by 51 points to 73, relative to the start of the second quarter.
1. Business activity expectations recovered. Architects and interior designers reported much higher expectations for new business activity for the third quarter of 2020 compared with the start of the previous quarter. Their score of 67 for the Expected Business Activity Indicator shows that more firms are expecting increases than are expecting decreases. The score is up 32 points from the start of Q2 2020.
Compared with the same period a year ago, this score is down 4 points.
Architects reported a 22-point increase in overall expectations, to 64, relative to the start of Q2 2020. Interior designers’ expectations rose more dramatically, by 51 points to 73, relative to the start of the second quarter.
2. Wait times increased nationally. The Project Backlog Indicator for architectural and design firms rose to an average of 4.5 weeks nationally at the start of the third quarter of 2020, an increase of 0.9 week from the start of Q2 2020.
Compared with a year ago, when wait times were 4.7 weeks, wait times are down 0.2 week.
Taking a closer look by professional type, architects have longer wait times to take on a new midsize project (5.5 weeks, up 1.9 weeks relative to the start of the previous three months) than do interior designers (2.8 weeks, down 0.9 week relative to the start of the previous three months).
Compared with a year ago, when wait times were 4.7 weeks, wait times are down 0.2 week.
Taking a closer look by professional type, architects have longer wait times to take on a new midsize project (5.5 weeks, up 1.9 weeks relative to the start of the previous three months) than do interior designers (2.8 weeks, down 0.9 week relative to the start of the previous three months).
Again, backlogs vary significantly by region, as this map shows. The New England division of the U.S. (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont) has the shortest average wait time (4 weeks), while the Mountain division (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming) has the longest (4.9 weeks).
3. Recent business activity rose somewhat. The score related to recent project inquiries and new committed projects in April, May and June increased to 48, a 4-point rise from the prior three months. Relative to the same period a year ago, this indicator is down 15 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.
If you are a pro and 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: Whether you’re a pro or a homeowner, we’d love to hear how this report compares with your experiences. Please share in the Comments.
More on Houzz
Read more stories about remodeling trends
Browse millions of photos for inspiration
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.
If you are a pro and 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: Whether you’re a pro or a homeowner, we’d love to hear how this report compares with your experiences. Please share in the Comments.
More on Houzz
Read more stories about remodeling trends
Browse millions of photos for inspiration
“Expectations for new business inquiries and committed projects have completely rebounded, following a sudden decline when the pandemic was declared,” Sargsyan says. “This is supported by an increase in new project inquiries in Q2, suggesting that homeowners are getting ready to renovate. Home professionals are finding ways to safely move projects forward with new safety guidelines, remote collaboration tools, and online consultations, invoicing and payments.”
More than 4 in 5 small businesses in the construction sector (83%) and architectural and design services sector (84%) have been affected by the coronavirus pandemic, according to the Q3 Houzz Renovation Barometer. The most common effects have been project delays (which hit 77% of construction sector firms and 72% of architectural and design sector firms); fewer new business inquiries (affecting 57% of firms in the construction sector and 66% of firms in the architectural and design sector); and project cancellations (58% and 61%, respectively).
But firms have responded with new ways of working with clients. Construction businesses implemented new safety guidelines, used video consultation tools and sourced more products online. Architecture and design firms offered video consultations, provided remote collaboration tools, sourced more products online and implemented safety guidelines at the office and on worksites. Some have begun to use Houzz Pro business management software to streamline their work.
Now 82% of construction firms and 73% of architecture and design firms have a neutral to good outlook on 2020, compared with 66% and 56%, respectively, at the start of the second quarter. Read on to find out more about what remodeling industry firms said 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.