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Houzz Barometer Shows Slowed Business Activity in Q3 2022
The design and construction sectors diverge in expectations. Project wait times for Q4 remain above pre-pandemic levels
The just-released 2022 Q4 Houzz Renovation Barometer provides timely insights into the impact of recent economic volatility on the home renovation market. Professionals across sectors report slower business activity in the third quarter but diverge in their expectations for the fourth quarter. A majority of businesses in the architectural and design services sector anticipate continued growth in Q4, while a majority of those in the construction sector anticipate slowed Q4 activity.
“As economic conditions are not showing signs of easing, businesses in the construction and design services sectors are navigating with caution. Professionals across industry sectors report slower business activity in Q3 2022 compared with Q2, citing increased costs of labor, products and materials, shortages across all aspects of the business and customers’ concerns about costs,” Houzz staff economist Marine Sargsyan says. “Construction sector professionals are neutral in their expectations for business activity through the end of the year. On the other hand, the majority of architects and interior designers anticipate increases in new committed projects in Q4.”
“As economic conditions are not showing signs of easing, businesses in the construction and design services sectors are navigating with caution. Professionals across industry sectors report slower business activity in Q3 2022 compared with Q2, citing increased costs of labor, products and materials, shortages across all aspects of the business and customers’ concerns about costs,” Houzz staff economist Marine Sargsyan says. “Construction sector professionals are neutral in their expectations for business activity through the end of the year. On the other hand, the majority of architects and interior designers anticipate increases in new committed projects in Q4.”
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 (from 62 for Q3 2022 to 50 for Q4) for construction firms. The decline in expectations was significant for both project inquiries and new committed projects (with scores going from 62 to 47 and from 63 to 53, respectively).
Build-only remodelers reported a 23-point decline in expectations for project inquiries and new committed projects for the fourth quarter, from 69 in Q3 to 46 in Q4. Expectations for design-build remodelers decreased slightly (from 56 for Q3 to 54 for Q4).
The Expected Business Activity Indicator for construction firms for Q4 dropped by 24 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 (from 62 for Q3 2022 to 50 for Q4) for construction firms. The decline in expectations was significant for both project inquiries and new committed projects (with scores going from 62 to 47 and from 63 to 53, respectively).
Build-only remodelers reported a 23-point decline in expectations for project inquiries and new committed projects for the fourth quarter, from 69 in Q3 to 46 in Q4. Expectations for design-build remodelers decreased slightly (from 56 for Q3 to 54 for Q4).
The Expected Business Activity Indicator for construction firms for Q4 dropped by 24 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 down from a record high but remain elevated. Project backlogs remain shorter after reaching a record high at the start of the second quarter of 2022 (the longest since the Backlog Indicator was added to the Barometer in 2017). The average wait time for new midsize projects to begin stayed at 10.5 weeks in the fourth quarter of 2022, the same wait time as the third quarter.
Year over year, the wait times are longer by nearly 1 week for build-only firms and shorter by more than 3 weeks for design-build firms.
Year over year, the wait times are longer by nearly 1 week for build-only firms and shorter by more than 3 weeks for design-build firms.
Backlogs differ 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 (7.9 weeks), while the East North Central division (Illinois, Indiana, Michigan, Ohio, Wisconsin) has the longest (12.6 weeks).
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A score higher than 50 indicates that more firms reported increases in their recent business activity than reported decreases.
3. Recent business activity decreased significantly. A decrease in new project inquiries and new committed projects in the third quarter of this year lowered the Recent Business Activity Indicator of the Barometer to 42 for construction firms, down 21 points from the previous quarter.
Overall, the recent activity indicator for construction firms was driven by a decrease of 27 points reported by build-only remodelers (61 in Q2 2022 compared with 34 in Q3 2022). Design-build remodelers reported a 14-point decrease in recent activity compared with Q2 2022, for a score of 50 in Q3 2022.
Relative to a year ago, the indicator is down significantly, by 31 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 decreased significantly. A decrease in new project inquiries and new committed projects in the third quarter of this year lowered the Recent Business Activity Indicator of the Barometer to 42 for construction firms, down 21 points from the previous quarter.
Overall, the recent activity indicator for construction firms was driven by a decrease of 27 points reported by build-only remodelers (61 in Q2 2022 compared with 34 in Q3 2022). Design-build remodelers reported a 14-point decrease in recent activity compared with Q2 2022, for a score of 50 in Q3 2022.
Relative to a year ago, the indicator is down significantly, by 31 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 increased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, increased (from 52 for Q3 2022 to 56 for Q4) for architectural and design firms. This increase in expectations was driven by an 11-point rise in new committed projects (from 51 for Q3 to 62 for Q4). Expectations for new project inquiries, however, declined by 3 points from Q3, for a score of 49.
Expectations among architects increased in the fourth quarter, from from 42 in Q3 to 52 in Q4. Meanwhile, expectations for interior designers decreased, from 68 in Q3 to 62 in Q4.
The Expected Business Activity Indicator score is now 13 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 increased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, increased (from 52 for Q3 2022 to 56 for Q4) for architectural and design firms. This increase in expectations was driven by an 11-point rise in new committed projects (from 51 for Q3 to 62 for Q4). Expectations for new project inquiries, however, declined by 3 points from Q3, for a score of 49.
Expectations among architects increased in the fourth quarter, from from 42 in Q3 to 52 in Q4. Meanwhile, expectations for interior designers decreased, from 68 in Q3 to 62 in Q4.
The Expected Business Activity Indicator score is now 13 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 are shorter than last year. The Project Backlog Indicator for architectural and design firms shows that wait times averaged 7.6 weeks nationally at the start of the fourth quarter of 2022, up 0.1 week compared with last quarter, when they were 7.5 weeks. Wait times are down 1.7 weeks compared with a year ago, when they averaged 9.3 weeks.
Taking a closer look by business type, architects reported wait times of 6 weeks to take on a new midsize project (down 5.1 weeks relative to Q4 2021). Interior designers reported wait times of 10.3 weeks (up 4.2 weeks relative to Q4 2021).
Taking a closer look by business type, architects reported wait times of 6 weeks to take on a new midsize project (down 5.1 weeks relative to Q4 2021). Interior designers reported wait times of 10.3 weeks (up 4.2 weeks relative to Q4 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 (6.1 weeks), while the West South Central division of the U.S. (Arkansas, Louisiana, Oklahoma, Texas) has the longest (9 weeks).
3. Recent business activity decreased. Architecture and design firms saw a decline in recent project inquiries and new committed projects in the third quarter of the year. Their score for the Recent Business Activity Indicator of the Barometer decreased by 4 points, to 52, from the previous quarter.
Among the two business groups, architects reported a 6-point decline (53 in Q2 2022 versus 47 in Q3) and interior designers reported a 2-point decline (62 in Q2 2022 versus 60 in Q3).
Year over year, the indicator is down 18 points, indicating that business activity has declined since the same time last year.
Among the two business groups, architects reported a 6-point decline (53 in Q2 2022 versus 47 in Q3) and interior designers reported a 2-point decline (62 in Q2 2022 versus 60 in Q3).
Year over year, the indicator is down 18 points, indicating that business activity has declined since the same time last year.
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). Expectation and business activity data is 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: We’d love to hear how this report compares with your experiences as a pro or as a homeowner. Please share in the Comments.
More on Houzz
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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: We’d love to hear how this report compares with your experiences as a pro or as a homeowner. Please share in the Comments.
More on Houzz
Read more stories about remodeling trends
Learn about Houzz Pro software
Talk with your peers in pro-to-pro discussions
Join the Houzz Trade Program
The 2022 Q4 Houzz Renovation Barometer looks at fourth-quarter residential renovation market expectations, project backlogs and recent business activity among construction, architectural and design firms, based on responses from 930 small businesses on Houzz. The survey was fielded Sept. 27, 2022, through Oct. 5, 2022.
The latest Backlog Indicator finds an average wait time of 10.5 weeks to start a new midsize project for the construction sector, which is 1.2 weeks shorter than a year ago but more than double Q4 2019 backlogs.
Project wait times are also easing for architects and interior designers. The average wait time to start a new midsize project in this sector is 7.6 weeks, which is 1.7 weeks shorter than the wait time one year ago.
Read on to find out more about what remodeling and design 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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