Industry Research
Firms Report Shorter Backlogs, Mixed Expectations for Q1 2023
Construction and design businesses report shorter wait times and diverging outlooks, the Houzz Q1 2023 Barometer shows
Though many home remodeling and design professionals reported slower business activity at the end of last year, their expectations for activity during the first quarter of 2023 vary by sector, new data from Houzz shows. The majority of professionals in the construction sector expressed more confidence than in Q4 ’22, while the majority of those in the architectural and design services sector had lower expectations, according to the 2023 Q1 Houzz Renovation Barometer. Pros across all sectors reported shorter wait times for starting new projects compared with the beginning of last year.
“In the short run, the Houzz Q1 2023 Renovation Barometer finds that confidence in business performance among professionals in the construction sector is stronger compared with the last quarter of 2022,” says Marine Sargsyan, Houzz staff economist. “That said, businesses also report shorter backlogs across the industry compared with a year ago, though they are still longer than pre-pandemic levels.”
“In the short run, the Houzz Q1 2023 Renovation Barometer finds that confidence in business performance among professionals in the construction sector is stronger compared with the last quarter of 2022,” says Marine Sargsyan, Houzz staff economist. “That said, businesses also report shorter backlogs across the industry compared with a year ago, though they are still longer than pre-pandemic levels.”
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 increased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, increased from 50 in Q4 2022 to 53 in Q1 2023 for construction firms. For both project inquiries and new committed projects, expectations increased quarter over quarter (from 47 to 52 and from 53 to 54, respectively). Build-only remodelers drove those increases with their more confident expectations in Q1 ’23 (53 compared with 46 in Q4 2022). Expectations among design-build remodelers declined a point (53 compared with 54 in Q4 ’22).
Year over year, the Expected Business Activity Indicator for construction firms for Q1 2023 dropped 26 points.
The 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 previous three months.
Construction Firms
1. Expectations for business activity increased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, increased from 50 in Q4 2022 to 53 in Q1 2023 for construction firms. For both project inquiries and new committed projects, expectations increased quarter over quarter (from 47 to 52 and from 53 to 54, respectively). Build-only remodelers drove those increases with their more confident expectations in Q1 ’23 (53 compared with 46 in Q4 2022). Expectations among design-build remodelers declined a point (53 compared with 54 in Q4 ’22).
Year over year, the Expected Business Activity Indicator for construction firms for Q1 2023 dropped 26 points.
The 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 previous three months.
2. Project wait times are down. The Backlog Indicator finds a national average wait time of 8.3 weeks to start a new midsize project in Q1 2023 for the construction sector. That compares with 11.4 weeks a year ago.
Looking by business type, wait times year over year are shorter by 2 weeks for build-only firms (7.5 in Q1 ’23 versus 9.5 in Q1 ’22) and by 4.2 weeks for design-build firms (9.1 weeks in Q1 ’23 versus 13.3 weeks in Q1 ’22).
Looking by business type, wait times year over year are shorter by 2 weeks for build-only firms (7.5 in Q1 ’23 versus 9.5 in Q1 ’22) and by 4.2 weeks for design-build firms (9.1 weeks in Q1 ’23 versus 13.3 weeks in Q1 ’22).
Backlogs differ significantly by region, as this map illustrates. The West North Central division of the U.S. (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota) has the shortest average wait time (6.5 weeks), and New England (Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island) has the longest (11.3 weeks).
See more resources for pros in Houzz Pro Learn
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 held steady. An increase in new project inquiries and a decrease in new committed projects in the fourth quarter of last year kept the Recent Business Activity Indicator of the Barometer holding steady at 42 for construction firms from the previous quarter. This compares with 71 in the first quarter of 2022.
Build-only remodelers reported an 8-point increase in recent business activity (from 34 in Q3 ’22 to 42 in Q4 2022). Design-build firms reported a 7-point decrease in activity (from 50 in Q3 ’22 to 43 in Q4 ’22).
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.
3. Recent business activity held steady. An increase in new project inquiries and a decrease in new committed projects in the fourth quarter of last year kept the Recent Business Activity Indicator of the Barometer holding steady at 42 for construction firms from the previous quarter. This compares with 71 in the first quarter of 2022.
Build-only remodelers reported an 8-point increase in recent business activity (from 34 in Q3 ’22 to 42 in Q4 2022). Design-build firms reported a 7-point decrease in activity (from 50 in Q3 ’22 to 43 in Q4 ’22).
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.
Architectural and Design Firms
1. Business activity expectations decreased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, decreased from 56 in Q4 2022 to 48 in Q1 ’23 for architectural and design firms. A 15-point decrease in new projects (from 62 in Q4 ’22 to 47 in Q1 ’23) drove this decline in expectations. Expectations for new project inquiries in Q1 2023 remained the same as in Q4 ’22 (49.)
Expectations among architects decreased from 52 in Q4 2022 to 43 in Q1 2023. Expectations for interior designers also decreased, from 62 in Q4 ’22 to 56 in Q1 ’23.
The Expected Business Activity Indicator score is 21 points lower than it was a year ago (48 in Q1 ’23 compared with 69 in Q1 ’22), which indicates that architects and interior designers are less optimistic than they were at this time last year.
1. Business activity expectations decreased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, decreased from 56 in Q4 2022 to 48 in Q1 ’23 for architectural and design firms. A 15-point decrease in new projects (from 62 in Q4 ’22 to 47 in Q1 ’23) drove this decline in expectations. Expectations for new project inquiries in Q1 2023 remained the same as in Q4 ’22 (49.)
Expectations among architects decreased from 52 in Q4 2022 to 43 in Q1 2023. Expectations for interior designers also decreased, from 62 in Q4 ’22 to 56 in Q1 ’23.
The Expected Business Activity Indicator score is 21 points lower than it was a year ago (48 in Q1 ’23 compared with 69 in Q1 ’22), which indicates that architects and interior designers are less optimistic than they were at this time last year.
2. Wait times are shorter than a year ago. Project wait times also decreased for architects and interior designers. The average wait time for a new midsize project in this sector is 5.3 weeks, which is 2.6 weeks shorter than the wait time a year ago (7.9).
Breaking it down by business type, architects reported wait times of 5.1 weeks to take on a new midsize project, 3.6 weeks shorter than a year ago (8.7), and interior designers reported wait times of 5.6 weeks, 1 week shorter than Q1 2022 (6.6).
Breaking it down by business type, architects reported wait times of 5.1 weeks to take on a new midsize project, 3.6 weeks shorter than a year ago (8.7), and interior designers reported wait times of 5.6 weeks, 1 week shorter than Q1 2022 (6.6).
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 (3.5 weeks), and the Middle Atlantic region (New York, New Jersey, Pennsylvania) has the longest (6.7 weeks).
3. Recent business activity slowed. Architecture and design firms saw a decline in both recent project inquiries and new committed projects in the fourth quarter of the year. Their score for the Recent Business Activity Indicator of the Barometer decreased 9 points from 52 in Q3 2022 to 43 in Q4 ’22.
Breaking it down, architects reported a 6-point decline in business activity (from 47 in Q3 2022 to 41 in Q4 ’22) and interior designers reported a 12-point decline (from 60 in Q3 2022 to 48 in Q4 ’22).
Year over year, the indicator is down 22 points, showing that business activity has declined since the same time in 2021.
Breaking it down, architects reported a 6-point decline in business activity (from 47 in Q3 2022 to 41 in Q4 ’22) and interior designers reported a 12-point decline (from 60 in Q3 2022 to 48 in Q4 ’22).
Year over year, the indicator is down 22 points, showing that business activity has declined since the same time in 2021.
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). Expected and recent business activity data is smoothed out to allow for predictable seasonal fluctuations; 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: 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
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
Read on to learn about what remodeling and design industry firms are saying about current business conditions for construction and architectural and design firms.
See how Houzz Pro can help you find customers, manage projects and grow your business