Renovation Activity Is at 6-Year High, New Houzz Barometer Shows
Home construction and design firms expect a strong third quarter 2021 despite rising costs and shortages
Mitchell Parker
July 14, 2021
Houzz Editorial Staff. Home design journalist writing about cool spaces, innovative trends, breaking news, industry analysis and humor.
Houzz Editorial Staff. Home design journalist writing about cool spaces, innovative... More
Following a strong start to 2021, residential construction and design professionals expressed overall confidence in home renovation activity for the next three months, according to the just-released 2021 Q3 Houzz Renovation Barometer.
The construction sector had an especially strong spring. Builders, including design-build firms, reported the busiest second quarter since the Houzz Barometer first began tracking metrics in 2015. And project wait times for construction pros jumped to an average of 10.8 weeks, the highest level reported since July 2018. Interior designers had a better second quarter than first quarter in 2021, and they reported increases in new committed projects in the pipeline. They also reported the highest project wait times since the Houzz Barometer began tracking this information in July 2017.
Architects were not as optimistic. They reported a slower second quarter than first quarter, with drops in project inquiries, new committed projects and backlogs. But overall confidence in the renovation industry remains high even as pros of all types continue to face challenges with material delays, shortages in labor and products, rising costs and extreme weather events.
“The residential construction and design industry has continued to thrive under strong demand,” says Marine Sargsyan, Houzz senior economist. “And professionals are confident about business performance through the end of the year.”
The construction sector had an especially strong spring. Builders, including design-build firms, reported the busiest second quarter since the Houzz Barometer first began tracking metrics in 2015. And project wait times for construction pros jumped to an average of 10.8 weeks, the highest level reported since July 2018. Interior designers had a better second quarter than first quarter in 2021, and they reported increases in new committed projects in the pipeline. They also reported the highest project wait times since the Houzz Barometer began tracking this information in July 2017.
Architects were not as optimistic. They reported a slower second quarter than first quarter, with drops in project inquiries, new committed projects and backlogs. But overall confidence in the renovation industry remains high even as pros of all types continue to face challenges with material delays, shortages in labor and products, rising costs and extreme weather events.
“The residential construction and design industry has continued to thrive under strong demand,” says Marine Sargsyan, Houzz senior economist. “And professionals are confident about business performance through the end of the year.”
The 2021 Q3 Houzz Renovation Barometer looks at third-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 over 1,300 home improvement firms on Houzz. The survey was fielded June 27 through July 7, 2021.
Challenges in the Home Renovation Industry
“Heightened activity is not without its challenges,” Sargsyan says. More than three-fourths of businesses in both the construction and architectural and design services sectors reported that costs and shortages for products and materials affected their businesses in Q2, while more than half of firms in both sectors reported that labor shortages and costs affected their businesses.
Specifically, more than 9 in 10 businesses across sectors reported increases in costs for lumber, copper, steel and aluminum in Q2. But about half of businesses said they didn’t expect those costs to continue to rise in the third quarter.
Some construction pros anticipate costs will rise for plastic, concrete, paint, foam and drywall in Q3. And some interior designers expect prices will rise for appliances, furniture and cabinetry.
Meanwhile, more than 9 in 10 (92%) construction businesses reported moderate to severe skilled labor shortages at the start of Q3. Specifically, construction pros reported a short supply of carpenters (58%), laborers (50%), framers (43%), plumbers (38%) and cabinet specialists (30%).
“Supply chain delays, extreme weather patterns, rising product and material costs and labor shortages create major headwinds for the industry,” Sargsyan says. “That said, favorable conditions prevail.”
Read on to learn 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 their business activity over the previous three months, then look at their project wait times. Lastly, we’ll see what these firms expect for the next three months.
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Challenges in the Home Renovation Industry
“Heightened activity is not without its challenges,” Sargsyan says. More than three-fourths of businesses in both the construction and architectural and design services sectors reported that costs and shortages for products and materials affected their businesses in Q2, while more than half of firms in both sectors reported that labor shortages and costs affected their businesses.
Specifically, more than 9 in 10 businesses across sectors reported increases in costs for lumber, copper, steel and aluminum in Q2. But about half of businesses said they didn’t expect those costs to continue to rise in the third quarter.
Some construction pros anticipate costs will rise for plastic, concrete, paint, foam and drywall in Q3. And some interior designers expect prices will rise for appliances, furniture and cabinetry.
Meanwhile, more than 9 in 10 (92%) construction businesses reported moderate to severe skilled labor shortages at the start of Q3. Specifically, construction pros reported a short supply of carpenters (58%), laborers (50%), framers (43%), plumbers (38%) and cabinet specialists (30%).
“Supply chain delays, extreme weather patterns, rising product and material costs and labor shortages create major headwinds for the industry,” Sargsyan says. “That said, favorable conditions prevail.”
Read on to learn 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 their business activity over the previous three months, then look at their project wait times. Lastly, we’ll see what these firms expect for the next three months.
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![Houzz Barometer Shows a Strong a Home Renovation Market [Contractors]](https://st.hzcdn.com/fimgs/9311af1200e88890_2118-w618-h393-b1-p0--home-design.jpg)
A score higher than 50 indicates that more firms reported increases than decreases in their recent business activity.
Construction Firms
1. Recent business activity rose substantially. Project inquiries and new committed projects increased in April, May and June, driving up the Recent Business Activity Indicator of the Barometer to 82, from 73 in the first quarter of the year.
In particular, project inquiries for construction pros increased to a score of 84 in the second quarter, up 5 points from 79 in the first quarter. New committed projects rose to 81, a dramatic increase of 14 points from 67 in the first quarter.
The positive news was felt among build-only remodelers as well as design-build firms. For Q2, build-only remodelers reported the highest Recent Business Activity score (82) since Houzz began reporting the Barometer in 2015. That score was up 12 points from 70 for the first quarter of 2021.
Design-build remodelers reported an increase of 7 points in recent activity, to a score of 83 in Q2, up from 76 in Q1.
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 (read more about these below), 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.
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Construction Firms
1. Recent business activity rose substantially. Project inquiries and new committed projects increased in April, May and June, driving up the Recent Business Activity Indicator of the Barometer to 82, from 73 in the first quarter of the year.
In particular, project inquiries for construction pros increased to a score of 84 in the second quarter, up 5 points from 79 in the first quarter. New committed projects rose to 81, a dramatic increase of 14 points from 67 in the first quarter.
The positive news was felt among build-only remodelers as well as design-build firms. For Q2, build-only remodelers reported the highest Recent Business Activity score (82) since Houzz began reporting the Barometer in 2015. That score was up 12 points from 70 for the first quarter of 2021.
Design-build remodelers reported an increase of 7 points in recent activity, to a score of 83 in Q2, up from 76 in Q1.
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 (read more about these below), 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.
See more resources for pros in Houzz Pro Learn
![Houzz Barometer Shows a Strong a Home Renovation Market [Contractors]](https://st.hzcdn.com/fimgs/21b1c4e800e88862_2062-w618-h413-b1-p0--home-design.jpg)
2. Project wait times are at a three-year high. Construction pros reported an average wait time of 10.8 weeks for projects in the coming three months. That’s more than a month longer than the average wait time a year ago (6.2 weeks) and the highest reported for the construction sector since July 2018.
For build-only remodelers, average project wait times in the coming three months are 10.5 weeks, up 2 weeks from the previous quarter.
Design-build remodelers reported the average project wait time in the coming three months at 11.1 weeks, an increase of a week from the previous three months.
For build-only remodelers, average project wait times in the coming three months are 10.5 weeks, up 2 weeks from the previous quarter.
Design-build remodelers reported the average project wait time in the coming three months at 11.1 weeks, an increase of a week from the previous three months.
![Houzz Barometer Shows a Strong Home Renovation Market [Contractors]](https://st.hzcdn.com/fimgs/6041974200ec7cdb_1196-w640-h538-b1-p0--home-design.jpg)
This map shows how average wait times vary significantly across the nine Census divisions in the U.S. The shortest average wait time (7.4 weeks) is in the West South Central division, while the longest (13 weeks) is in the New England division. Backlogs in the construction sector are longer than they were a year ago across all nine Census divisions.
![Houzz Barometer Shows a Strong a Home Renovation Market [Contractors]](https://st.hzcdn.com/fimgs/8bc1fc1800e88878_2096-w618-h363-b1-p0--home-design.jpg)
A score higher than 50 indicates that more firms reported increases than decreases in their business expectations. The second quarter of 2020 marked the first time since the Houzz Barometer began in 2015 that scores fell below 50.
3. Expectations for business activity are rising. Build-only remodelers and design-build firms both reported increases in project inquiries and new committed projects for July, August and September 2021 compared with the previous three months.
The Expected Business Activity Indicator climbed to 76 for the third quarter from 73 in the previous quarter. “Our Expected Business Activity indicators are at some of the highest levels we’ve seen across both sectors since we began tracking the Barometer,” Sargsyan says.
Looking more closely at the breakdown, expectations for project inquiries in the construction sector grew significantly to 79 for the third quarter, up from 75 in the second quarter. New committed projects rose to 73 in the third quarter, up from 70 in the previous quarter.
Overall expectations rose significantly for design-build firms, which reported a score of 76 in the third quarter of 2021, up 6 points from 70 in the second quarter.
But expectations were strong among build-only remodelers as well, who reported an increase to 77 in the third quarter, up from 75 in the second quarter.
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.
3. Expectations for business activity are rising. Build-only remodelers and design-build firms both reported increases in project inquiries and new committed projects for July, August and September 2021 compared with the previous three months.
The Expected Business Activity Indicator climbed to 76 for the third quarter from 73 in the previous quarter. “Our Expected Business Activity indicators are at some of the highest levels we’ve seen across both sectors since we began tracking the Barometer,” Sargsyan says.
Looking more closely at the breakdown, expectations for project inquiries in the construction sector grew significantly to 79 for the third quarter, up from 75 in the second quarter. New committed projects rose to 73 in the third quarter, up from 70 in the previous quarter.
Overall expectations rose significantly for design-build firms, which reported a score of 76 in the third quarter of 2021, up 6 points from 70 in the second quarter.
But expectations were strong among build-only remodelers as well, who reported an increase to 77 in the third quarter, up from 75 in the second quarter.
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.
![Houzz Barometer Shows a Strong a Home Renovation Market [Design Pros]](https://st.hzcdn.com/fimgs/46814c5a00e888de_2341-w618-h349-b1-p0--home-design.jpg)
Architectural and Design Services Firms
A majority of interior designers said they had a better second quarter compared with the first, and many reported an increase in new committed projects and higher backlogs for the coming quarter.
But architects reported a slower second quarter than first, with drops for project inquiries, new committed projects and backlogs. And architects are generally not quite as optimistic about the third quarter as they were about the second quarter earlier in the year.
1. Recent business activity dips slightly. The Recent Business Activity Indicator, related to project inquiries and new committed projects, declined to 72 in the second quarter of 2021, from 75 in the first. Still, that score is significantly higher than business activity reported since 2015.
Overall project inquiries decreased (from 76 in Q1 to 74 in Q2), as did new committed projects (from 75 to 71). The lack of recent activity among architects drove the overall decline in the architectural and design services sector.
Interior designers reported a 3-point increase in overall recent activity (from 69 in Q1 to 72 in Q2), while architects reported a 7-point drop (from 79 to 72).
A majority of interior designers said they had a better second quarter compared with the first, and many reported an increase in new committed projects and higher backlogs for the coming quarter.
But architects reported a slower second quarter than first, with drops for project inquiries, new committed projects and backlogs. And architects are generally not quite as optimistic about the third quarter as they were about the second quarter earlier in the year.
1. Recent business activity dips slightly. The Recent Business Activity Indicator, related to project inquiries and new committed projects, declined to 72 in the second quarter of 2021, from 75 in the first. Still, that score is significantly higher than business activity reported since 2015.
Overall project inquiries decreased (from 76 in Q1 to 74 in Q2), as did new committed projects (from 75 to 71). The lack of recent activity among architects drove the overall decline in the architectural and design services sector.
Interior designers reported a 3-point increase in overall recent activity (from 69 in Q1 to 72 in Q2), while architects reported a 7-point drop (from 79 to 72).
![Houzz Barometer Shows a Strong a Home Renovation Market [Design Pros]](https://st.hzcdn.com/fimgs/3f31670300e888ac_2142-w618-h405-b1-p0--home-design.jpg)
2. Project wait times differ between interior designers and architects. The average wait time for a project expected in the third quarter decreased to 7.2 weeks from 8.4 weeks in the second quarter of 2021. But that’s still an average of 2.7 weeks longer than it was a year ago (4.5 weeks).
The long wait times are driven by the highest reported backlogs by interior design firms since the Houzz Barometer began tracking this information in July 2017. That group reported an average increase in wait time to 8.5 weeks in Q3, up 3.8 weeks from Q2.
Architects reported a decrease in expected backlogs, to 6.5 weeks in Q3, a dramatic drop of 4.1 weeks from Q2.
The long wait times are driven by the highest reported backlogs by interior design firms since the Houzz Barometer began tracking this information in July 2017. That group reported an average increase in wait time to 8.5 weeks in Q3, up 3.8 weeks from Q2.
Architects reported a decrease in expected backlogs, to 6.5 weeks in Q3, a dramatic drop of 4.1 weeks from Q2.
This map shows how average wait times for the architectural and design services firms vary significantly across the nine Census divisions in the U.S. For example, wait times are shortest in the East South Central division, at an average of 5.6 weeks, and longest in the Middle Atlantic division, at an average of 9.1 weeks.
Still, reported backlogs are longer across all divisions in Q3 2021 than in the same quarter last year for the sector.
Still, reported backlogs are longer across all divisions in Q3 2021 than in the same quarter last year for the sector.
![Houzz Barometer Shows a Strong a Home Renovation Market [Design Pros]](https://st.hzcdn.com/fimgs/d7016bc600e888c1_2256-w618-h357-b1-p0--home-design.jpg)
A score higher than 50 indicates that more firms reported increases than decreases in their recent business activity.
3. Expected business activity ticked down. The Expected Business Activity Indicator score for the U.S. architectural and design services sector decreased to 70 in Q3 from 74 in Q2.
Interior designers were optimistic, lifting their indicator score 5 points (from 73 in Q2 to 78 in Q3).
Architects, who drove much of the overall indicator score decline, were less optimistic. Following unusually high expectations in the second quarter, architects tempered their anticipation of project inquiries and new committed projects. Their Expected Business Indicator score dropped 8 points (from 74 in Q2 to 66 in Q3).
Looking at the architectural and design services sector as a whole, a 7-point drop in the score for project inquiries (from 77 in Q2 to 70 in Q3) also contributed to the overall decline in expected business activity. The quarter-over-quarter score for new committed projects remained the same at 70.
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.
3. Expected business activity ticked down. The Expected Business Activity Indicator score for the U.S. architectural and design services sector decreased to 70 in Q3 from 74 in Q2.
Interior designers were optimistic, lifting their indicator score 5 points (from 73 in Q2 to 78 in Q3).
Architects, who drove much of the overall indicator score decline, were less optimistic. Following unusually high expectations in the second quarter, architects tempered their anticipation of project inquiries and new committed projects. Their Expected Business Indicator score dropped 8 points (from 74 in Q2 to 66 in Q3).
Looking at the architectural and design services sector as a whole, a 7-point drop in the score for project inquiries (from 77 in Q2 to 70 in Q3) also contributed to the overall decline in expected business activity. The quarter-over-quarter score for new committed projects remained the same at 70.
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.
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 is smoothed out to allow for predictable seasonal fluctuations, while wait-time data is 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.
More on Houzz
Read more stories about remodeling trends
Learn about Houzz Pro software
Talk with your peers in the Pro-to-Pro discussions
Join the Houzz Trade Program
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.
More on Houzz
Read more stories about remodeling trends
Learn about Houzz Pro software
Talk with your peers in the Pro-to-Pro discussions
Join the Houzz Trade Program
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An excellent read! We've spent so much time staring at our intimate surroundings that we want to truly create environments that enhance our lives - in every nook and cranny. I'm seeing so many construction projects in my city!
This article is spot on with respect to the supply side especially. we are a design/build firm and while projects are off to a good start, we have experienced headwinds on sourcing and delivery of products. Some of our trusted partners/manufacturers have temporarily halted some product offerings in early Q3 due to their inability to obtain needed materials from Europe and other ports. Fortunately we source materials and fixtures for our contracts before day 1 start so we were in a decent position to be flexible with substitutions when first choice was not available. It isn’t always easy. It is a delicate dance to make these projects happen without the appearance of downtime, and our clients are extremely happy with the result.