Houzz Barometer Points to Strength in the Home Renovation Market

Residential construction and design businesses see new project wait times soar in Q2 2021 compared with one year ago

Bryan Anthony April 14, 2021

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Following a strong start to 2021, the Houzz Barometer reveals continued confidence among remodeling professionals for home renovation activity in the second quarter of the year. In particular, architects and interior designers report the highest level of recent business activity since the launch of the Barometer in Q4 2014.

Surging demand for new residential construction and design projects has resulted in a backlog, with wait times of more than two months to start new midsize projects — about double the wait compared with this time last year.

“The Barometer points to strong market conditions, diminishing the uncertainty experienced by residential remodeling and design businesses just one year ago,” says Marine Sargsyan, Houzz senior economist. “Following a busy first quarter, businesses are faced with soaring homeowner demand along with lengthy permitting timelines, supply chain constraints and unrelenting labor shortages. These constraints likely contribute to industrywide wait times of more than two months before a business can begin a new project.”

Murphy Maude Interiors

The Q2 2021 Houzz Renovation Barometer looks at second-quarter residential renovation market expectations, project backlogs and recent business activity among firms in the construction and architectural and design services sectors, based on responses from 1,497 small businesses on Houzz. The survey was fielded March 25 through April 8.

“The pandemic accelerated the adoption of online tools like our Houzz Pro business management and marketing software, which offers remote collaboration solutions such as video meetings, online invoicing and electronic payments to help residential design and construction firms connect with customers and move projects forward safely and easily,” says Liza Hausman, Houzz vice president of Industry Marketing. “As renovation project demand surges, businesses are turning to software to help them better manage both the influx of new project inquiries and the resulting projects. Growth in use of the Houzz Pro CRM tool in particular has nearly tripled over the past eight months.”

Architecture and design firms have responded to the pandemic with safety guidelines and remote-collaboration tools, and a growing number of businesses in the architectural and design services, as well as the construction sector, have adopted online invoicing and payments (38% and 31%, respectively, in Q2 2021, versus 33% and 24% in Q3 2020).

Read on to find out more about what remodeling industry firms said about current business conditions. We’ll look first 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. Lastly, we’ll review their business activity over the previous three months.

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Newcastle Homes

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 increased somewhat. The Expected Business Activity Indicator, related to project inquiries and new committed projects, rose to 73 in Q2 from 70 in the first quarter of 2021. Notably, the expectations for project inquiries increased significantly, from 70 to 75 in Q2. Expectations for new committed projects increased 1 point from last quarter (69 to 70).

Build-only remodelers reported a significant 8-point increase in expectations for project inquiries and new projects (up from 67 in Q1 to 75 in Q2). Expectations for design-build remodelers were tempered (down from 73 in Q1 to 70 in Q2).

Looking back further, however, the difference from a year ago is dramatic. The Expected Business Activity Indicator for construction firms is up a whopping 55 points from the second quarter of last year, when an all-time low of 18 was recorded in the early days of the pandemic.

The Expected Business Activity Indicator is based on survey questions that ask businesses to report whether they expect 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 expect increases than decreases.

Hume Building

2. Project wait times rose nationally. The demand for construction services is strong, as wait times for new midsize projects to begin rose among both reporting business groups. Build-only remodelers reported a wait time of 8.5 weeks to take on a new project (up 1.7 weeks relative to Q1). And design-build remodelers reported a wait time of 10.1 weeks (up 2.1 weeks relative to Q1).

A year ago, the national average wait time was 5.4 weeks, meaning the average wait time is almost one month (3.9 weeks) longer than the same period last year.

Backlogs range quite a bit 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 (7.1 weeks), while the New England division (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont) has the longest (11.3 weeks) among the nine geographic divisions as defined by the U.S. Census Bureau.

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Sun Bay Builders

A score higher than 50 indicates that more firms reported increases than decreases in their recent business activity.

3. Recent business activity increased significantly. An increase in new project inquiries and new committed projects in January, February and March pushed the Recent Business Activity Indicator of the Barometer to 73 for construction firms, up 11 points from the previous quarter. Both build-only remodelers and design-build remodelers reported significant increases in recent business activity over this period.

Relative to a year ago, this indicator is up a dramatic 25 points.

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. A score higher than 50 indicates that more firms reported increases than decreases.

J Taylor Designs

Architectural and Design Services Firms

1. Business activity expectations increased. Architects and interior designers reported higher expectations for new business activity for the second quarter of 2021 compared with the start of the previous quarter. Their score of 74 for the Expected Business Activity Indicator shows that more firms are expecting increases in new business activity than are expecting decreases. This measure is up 6 points from the start of Q1 2021, when it was 68.

The score now stands 39 points higher than it did one year ago, when expectations plummeted at the start of the pandemic.

Architects reported a 5-point increase in overall expectations, to 74, relative to the start of Q1 2021. Interior designers’ expectations increased by 6 points, to 73, relative to the start of the first quarter.

Alicja Crosby Interiors

2. Wait times increased nationally. The Project Backlog Indicator for architectural and design firms averages 8.4 weeks nationally at the start of the second quarter of 2021, up 2.8 weeks compared with the start of the first quarter.

Compared with a year ago, when wait times were 3.6 weeks, wait times are up more than a month (4.8 weeks).

Taking a closer look by professional type, architects have significantly longer wait times to take on a new midsize project (10.6 weeks, up 4.5 weeks relative to the start of the previous three months) than do interior designers (4.7 weeks, down 0.2 week relative to the start of the previous three months).

Again, backlogs vary by region, as this map shows. The Pacific division of the U.S. (California, Oregon, Washington) has the shortest average wait time (7.7 weeks), while the Mountain division (Arizona, Colorado, Idaho, Montana, New Mexico, Utah, Wyoming) and the West North Central division (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota) have the longest (9.0 weeks).

Pruett & Co.

3. Recent business activity rose. Similarly to construction firms, architecture and design firms saw a significant increase in recent project inquiries and new committed projects in January, February and March. Their score for the Recent Business Activity Indicator of the Barometer increased to 75, an 11-point rise from the prior three months and the highest level recorded since the launch of the Barometer in Q4 2014.

Relative to the same period a year ago, the indicator is up 31 points.

KGA Studio Architects, PC

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’re 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 on this and past 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.

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