Industry Research
Renovation Barometer
Remodelers and Designers Temper Expectations for 2nd Quarter 2022
Houzz Barometer shows lengthy backlogs resulting from continued home improvement activity and supply chain disruptions
The just-released 2022 Q2 Houzz Renovation Barometer reveals that construction businesses have tempered their positive outlook for expected business activity in the second quarter of 2022 from last quarter’s peak in expectations, despite a strong first-quarter performance. While architecture and design professionals remain confident about their business outlook, this has softened slightly, with expectations declining somewhat for project inquiries and new committed projects.
“While business activity and the confidence in demand for construction and design services have been the strongest we’ve seen in the last four quarters, industry professionals are cautious about expected Q2 performance,” Houzz staff economist Marine Sargsyan says. “Pros anticipate some impact on project inquiries due to inflation, supply chain delays and rising costs for materials, such as lumber, aluminum and even gasoline. Lengthy backlogs persist into Q2, however, signaling continued home renovation and design activity.”
“While business activity and the confidence in demand for construction and design services have been the strongest we’ve seen in the last four quarters, industry professionals are cautious about expected Q2 performance,” Houzz staff economist Marine Sargsyan says. “Pros anticipate some impact on project inquiries due to inflation, supply chain delays and rising costs for materials, such as lumber, aluminum and even gasoline. Lengthy backlogs persist into Q2, however, signaling continued home renovation and design activity.”
A score higher than 50 indicates that more firms reported increases in their business expectations than reported decreases.
Construction Firms
1. Expectations for business activity decreased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, decreased to 67 in the second quarter from 79 in the first quarter of 2022. The decline in expectations was significant for both project inquiries and new committed projects (with scores going from 80 to 65 and from 78 to 69, respectively). It’s important to note that expectations in Q1 were at an all-time high since the Barometer began tracking them, and that this quarter’s expectations are in line with those a year ago.
Build-only remodelers reported a 10-point decline (from 83 to 73) in expectations for project inquiries and new committed projects in the second quarter of this year compared with the first quarter. Expectations for design-build remodelers also decreased significantly (from 75 in Q1 to 62 in Q2).
The Expected Business Activity Indicator for construction firms in Q2 dropped by 6 points year over year. This indicator is based on survey questions about whether businesses expect the number of project inquiries and new projects to increase, decrease or remain 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.
Construction Firms
1. Expectations for business activity decreased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, decreased to 67 in the second quarter from 79 in the first quarter of 2022. The decline in expectations was significant for both project inquiries and new committed projects (with scores going from 80 to 65 and from 78 to 69, respectively). It’s important to note that expectations in Q1 were at an all-time high since the Barometer began tracking them, and that this quarter’s expectations are in line with those a year ago.
Build-only remodelers reported a 10-point decline (from 83 to 73) in expectations for project inquiries and new committed projects in the second quarter of this year compared with the first quarter. Expectations for design-build remodelers also decreased significantly (from 75 in Q1 to 62 in Q2).
The Expected Business Activity Indicator for construction firms in Q2 dropped by 6 points year over year. This indicator is based on survey questions about whether businesses expect the number of project inquiries and new projects to increase, decrease or remain 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.
2. Project wait times are at an all-time high. Project backlogs are now the longest since the Backlog Indicator was added to the Barometer in 2017. Specifically, the construction sector’s overall backlog has nearly doubled compared with the same period in 2019. The average wait time for new midsize projects to begin increased from 11.4 weeks in the first quarter of 2022 to 12 weeks in the second quarter.
Build-only remodelers reported a wait time of 7.2 weeks to take on a new project, while the average wait among design-build firms was 16.8 weeks. Year over year, the wait times are shorter by 1.3 weeks for build-only firms and longer by 6.7 weeks for design-build firms.
Build-only remodelers reported a wait time of 7.2 weeks to take on a new project, while the average wait among design-build firms was 16.8 weeks. Year over year, the wait times are shorter by 1.3 weeks for build-only firms and longer by 6.7 weeks for design-build firms.
Backlogs range quite a bit 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 (9.4 weeks), while the East North Central division (Illinois, Indiana, Michigan, Ohio, Wisconsin) has the longest (13.8 weeks).
Backlogs in the construction sector are the same or longer than a year ago across all nine U.S. Census Bureau geographic divisions.
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Backlogs in the construction sector are the same or longer than a year ago across all nine U.S. Census Bureau geographic divisions.
See more resources for pros in Houzz Pro Learn
A score higher than 50 indicates that more firms reported increases in their recent business activity than reported decreases.
3. Recent business activity increased. An increase in new project inquiries and new committed projects in the first quarter of this year raised the Recent Business Activity Indicator of the Barometer to 71 for construction firms, up by 6 points from the previous quarter.
Overall, the recent activity indicator for construction firms was driven by an increase of 14 points reported by build-only remodelers (coming in at 72 in Q1 2022 compared with 58 in Q4 2021). Design-build remodelers reported a 1-point decrease in recent activity from Q4 2021, for a score of 71 in Q1 2022.
Relative to a year ago, the indicator is down by 2 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 about whether businesses observed an increase, decrease or no change in the actual number of project inquiries and new committed projects over the previous three months, relative to the three months before that. A score higher than 50 indicates that more firms reported increases than decreases.
3. Recent business activity increased. An increase in new project inquiries and new committed projects in the first quarter of this year raised the Recent Business Activity Indicator of the Barometer to 71 for construction firms, up by 6 points from the previous quarter.
Overall, the recent activity indicator for construction firms was driven by an increase of 14 points reported by build-only remodelers (coming in at 72 in Q1 2022 compared with 58 in Q4 2021). Design-build remodelers reported a 1-point decrease in recent activity from Q4 2021, for a score of 71 in Q1 2022.
Relative to a year ago, the indicator is down by 2 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 about whether businesses observed an increase, decrease or no change in the actual number of project inquiries and new committed projects over the previous three months, relative to the three months before that. A score higher than 50 indicates that more firms reported increases than decreases.
Architectural and Design Firms
1. Business activity expectations declined slightly. The Expected Business Activity Indicator, related to project inquiries and new committed projects, decreased slightly (from 69 in Q1 2022 to 65 in Q2). This decline in expectations was driven by an 8-point drop in project inquiries (from 71 in Q1 to 63 in Q2). Expectations for new committed projects increased by 1 point from Q1, for a score of 68.
Expectations among architects declined to 60 in the second quarter, compared with 68 in Q1. In contrast, expectations for interior designers increased to 73, compared with 70 in Q1.
The Expected Business Activity Indicator score is now 9 points lower than a year ago, which indicates that architects and interior designers are less optimistic than they were at this time last year.
1. Business activity expectations declined slightly. The Expected Business Activity Indicator, related to project inquiries and new committed projects, decreased slightly (from 69 in Q1 2022 to 65 in Q2). This decline in expectations was driven by an 8-point drop in project inquiries (from 71 in Q1 to 63 in Q2). Expectations for new committed projects increased by 1 point from Q1, for a score of 68.
Expectations among architects declined to 60 in the second quarter, compared with 68 in Q1. In contrast, expectations for interior designers increased to 73, compared with 70 in Q1.
The Expected Business Activity Indicator score is now 9 points lower than a year ago, which indicates that architects and interior designers are less optimistic than they were at this time last year.
2. Wait times remain long. The Project Backlog Indicator for architectural and design firms shows that wait times averaged 7.9 weeks nationally at the start of the second quarter of 2022, down by 0.5 weeks compared with a year ago, when they were 8.4 weeks.
Taking a closer look by business type, architects reported wait times of 9.2 weeks to take on a new midsize project (down by 1.4 weeks relative to Q2 2021). Interior designers reported wait times of 5.8 weeks (up 1.1 weeks relative to Q2 2021).
Taking a closer look by business type, architects reported wait times of 9.2 weeks to take on a new midsize project (down by 1.4 weeks relative to Q2 2021). Interior designers reported wait times of 5.8 weeks (up 1.1 weeks relative to Q2 2021).
Again, backlogs vary by region, as this map shows. The West North Central division of the U.S. (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota) has the shortest average wait time (6.2 weeks), while the Mid Atlantic division of the U.S. (New Jersey, New York, Pennsylvania) has the longest average wait time (9.9 weeks).
Compared with the same quarter a year ago, backlogs in the architectural and design services sector are shorter across five of the nine census divisions (East South Central, Mountain, New England, South Atlantic and West North Central divisions).
Compared with the same quarter a year ago, backlogs in the architectural and design services sector are shorter across five of the nine census divisions (East South Central, Mountain, New England, South Atlantic and West North Central divisions).
3. Recent business activity decreased slightly. Architecture and design firms saw a decline in recent project inquiries and new committed projects in the first quarter of this year. Their score for the Recent Business Activity Indicator of the Barometer decreased by 2 points, to 63, from the previous quarter.
Among the two business groups sharing recent activity, architects reported a 2-point decline (61 in Q1 2022 versus 63 in Q4 2021) and interior designers reported a 3-point decline (66 in Q1 2022 versus 63 in Q4 2021).
Year over year, the indicator is down 12 points, indicating that business activity has declined since the same time last year. It’s important to note that despite the drop, recent business activity is in line with pre-pandemic levels.
Among the two business groups sharing recent activity, architects reported a 2-point decline (61 in Q1 2022 versus 63 in Q4 2021) and interior designers reported a 3-point decline (66 in Q1 2022 versus 63 in Q4 2021).
Year over year, the indicator is down 12 points, indicating that business activity has declined since the same time last year. It’s important to note that despite the drop, recent business activity is in line with pre-pandemic levels.
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 (wait time). Expectations and business activity data are smoothed out to allow for predictable seasonal fluctuations, while wait-time data is not.
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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
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If you’re a pro and you’d 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
The 2022 Q2 Houzz Renovation Barometer looks at second-quarter residential renovation market expectations, project backlogs and recent business activity among construction, architectural and design firms, based on responses from 1,066 small businesses on Houzz. The survey was fielded March 27, 2022, through April 7, 2022.
Project backlogs have continued to grow across the industry, according to the Barometer. The average wait time to begin a new midsize project has reached three months for construction pros and nearly two months for architects and interior designers. In fact, wait times for the construction sector are now the longest since the Backlog Indicator was added to the Barometer in 2017.
Read on to find out more about what remodeling industry firms are saying about current business conditions. We’ll look first at construction companies and then at architectural and design firms. We’ll start with what these firms expect for the next three months, then look at their project wait times. Last, we’ll review their business activity over the previous three months.
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