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Houzz Barometer Points to Home Renovation Market Strength

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Houzz Inc., the leading platform for home remodeling and design, released the Q2 2021 Houzz Renovation Barometer, which tracks residential renovation market expectations, project backlogs and recent activity among businesses in the construction sector and the architectural and design services sector in the U.S. The Houzz Barometer reveals confidence among residential construction and design businesses for home renovation activity in the second quarter of the year, following a strong first quarter.  

 

“The Barometer points to strong market conditions, diminishing the uncertainty experienced by residential remodeling and design businesses just one year ago,” said 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 industry-wide wait times of more than two months before a business can begin a new project.”

 

Q2 2021 Construction Sector Barometer

  • The Expected Business Activity Indicator related to project inquiries and new committed projects increased to 73 in Q2 (compared to 70 in Q1). Expectations for project inquiries grew significantly to 75 compared to 70 in Q1 and new committed projects rose slightly to 70 (up one point relative to Q1).
  • The Project Backlog Indicator increased to 9.3 weeks in Q2, which is nearly a month longer than a year ago (5.4 weeks). Wait times are the highest reported for the sector since July 2018.
  • The Recent Business Activity Indicator related to project inquiries and new committed projects increased substantially to 73 in Q1 (compared to 62 in Q4, 2020). This is driven by growth in project inquiries, which increased to 79 in Q1 (up 19 points relative to Q4, 2020), and by a rise in new committed projects to 67 (up four points relative to Q4, 2020).

 

Q2 2021 Architectural and Design Services Sector Barometer

  • The Expected Business Activity Indicator related to project inquiries and new committed projects increased to 74 in Q2 (compared to 68 in Q1). Expectations also increased for project inquiries to 77 (up nine points, compared to Q1) and slightly decreased for new committed projects to 70 in Q2 (down one point compared to Q1). 
  • The Project Backlog Indicator increased to 8.4 weeks in Q2, which is more than a month longer than a year ago (3.6 weeks). Record wait times are driven by the highest reported backlogs by architecture firms since the Houzz Barometer began tracking this information in July 2017.
  • The Recent Business Activity Indicator related to project inquiries and new committed projects increased substantially to 75 in Q1 (compared to 64 in Q4, 2020), the highest reported business activity for the sector since launching the Houzz Barometer in 2015. This is driven by a jump in project inquiries to 76 (up 12 points in Q1 relative to Q4, 2020), and an increase in new committed projects to 75 (up 11 points relative to Q4, 2020).

 

COVID-19’s Influence on Home Renovation and Design Businesses 

Home renovation and design businesses have continued to respond to pandemic-related business challenges by implementing new tools and practices. 

  • Approximately one third of businesses in the architectural and design services sector, as well as the construction sector, have increasingly adopted online invoicing and payments (38 and 31 percent in Q2 2021, versus 33 and 24 percent in Q3 2020, respectively). 
  • Architecture and design firms reported that the top three activities they implemented in response to pandemic-related challenges included video consultations, new safety guidelines at the office and worksite and remote collaboration tools (57, 51 and 47 percent, respectively). 
  • Construction businesses reported that the top three activities they adopted in response to pandemic-related challenges included new safety guidelines, online product sourcing and digital tools for document and contract approvals (59, 35 and 35 percent, respectively). 

 

“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,” said 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.” 

 

 

Notes

 

The Houzz Renovation Barometer is based on a quarterly online survey sent to a national panel of businesses with an online profile on Houzz. The Barometer keeps a pulse on home renovation market conditions via three distinct indices that track expected, current, and recent business activity in two related industry sectors, the construction sector and the architectural and design services sector.

 

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 committed projects to increase, decrease or stay unchanged in the upcoming quarter relative to the prior quarter. Scores for each component are then computed as a seasonally adjusted diffusion indices on a scale of 0 to 100, with index values over 50 indicating that a greater proportion of firms reported quarter-over-quarter increases than those reporting decreases. 

 

The Recent Business Activity Indicator is 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 unchanged in the most recent quarter relative to the prior quarter. Scores for each component are then computed as a seasonally adjusted diffusion indices similar to the Expected Business Activity Indicator. Recent Business Activity Indicator scores can be compared to the Expected Business Activity Indicator scores for any given quarter to see whether actual activity met, exceeded, or fell short of expectations.

 

Finally, the Backlog Indicator is based on survey questions that ask businesses to report wait times in weeks before a company can start work on a new midsize project. Scores are computed as average wait times without a seasonal adjustment. 

 

All three indices are computed individually for two subsectors in the construction sector (build only remodelers and design and build remodelers) and for two subsectors in the architectural and design services sector (architects and interior designers), as well as for nine regions that follow U.S. Census Bureau Divisions. The aggregated national indices are computed using industry subsector weights and regional weights derived from the 2016 U.S. Census County Business Patterns survey. Detailed methodology and underlying quarterly indices for the construction sector and the architectural and design services sector, and other information on market conditions can be found on houzz.com/research.

 

The Q2 2021 Barometer was fielded March 25 through April 8th, 2021 and garnered responses from nearly 1,500 home improvement firms on Houzz. n=1,497.


 

About Houzz: Houzz is the leading platform for home renovation and design, providing people with everything they need to improve their homes from start to finish. On Houzz, people can find design inspiration, research and hire home professionals, and shop for products to complete their projects. For home professionals, Houzz Pro (houzz.com/pro) provides an all-in-one software solution that empowers industry pros to stand out, win clients and manage their projects efficiently and profitably. The Houzz community is made up of millions of homeowners, home design enthusiasts and home improvement professionals around the world. Houzz is available on the web and as a top-rated mobile app. Headquartered in Palo Alto, California, Houzz also has international offices in London, Berlin, Sydney, Moscow, Tel Aviv and Tokyo. Houzz is a registered trademark of Houzz Inc. worldwide. For more information, visit houzz.com.

 

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