Houzz Q3 Renovation Barometer Reports Positive Outlook

Palo Alto, CA, October 25, 2017-Houzz’s Q3 2017 Houzz Renovation Barometer reflected high quarter-over-quarter confidence for all industry sectors, including architects, designers, general contractors (GCs)/remodelers, design-build, specialty building/renovation and specialty landscape/outdoor, with readings of 62 or higher. Expectations for Q4 are strong across all sectors.

Coupled with this positive business outlook are persistent labor shortages, as reported by 78% of general contractors (GCs), remodelers and design-build firms. For homeowners, this translates to higher costs and longer project timelines. Fifty-six percent of renovation firms report increasing costs of subcontractors in Q3 2017 (versus 53% in Q3 2016) and 54% report increasing project lengths (versus 50% in Q3 2016) due to labor shortages.

The Houzz Renovation Barometer Backlog Index increased slightly from Q2 2017 to Q3 2017, with project backlogs of five to eight weeks on average across sectors, reflecting significant wait times before companies can take on new projects. GCs, remodelers and design-build companies have the longest average backlogs (7.1 and 7.7 weeks, respectively).

“Residential renovation and design professionals report another strong quarter of new business activity and a very positive outlook in the near term,” said Nino Sitchinava, principal economist at Houzz. “That said, widespread skilled labor shortages leave little wiggle room for businesses to absorb sudden demand pressures such as recent hurricanes in the South or more localized damage from wildfires in the West, driving up wait times.”

Given the recent severe impact of hurricanes Harvey and Irma in the Houston metropolitan area and Southwestern Florida, Houzz took a deeper look at conditions among renovation professionals in these areas.

Within the first two weeks of landfall, the hurricanes caused 28% of renovation-related businesses in the Houston metropolitan area and 41% in Southwestern Florida to suspend business operations in these areas. Among companies that suspended operations, 91% of those impacted by Hurricane Harvey kept their doors closed for a week or longer, and 65% of those affected by Hurricane Irma.

The hurricanes also exacerbated labor shortages across the region and increased project backlogs by nearly two weeks, on average. Top business challenges exacerbated by the hurricane disruptions are the shortage of subcontractors (38% for both Irma and Harvey-stricken areas), managing cost-concerned consumers (23% and 46%, respectively), and managing consumer expectations (23% and 31%, respectively). A shortage of products and/or materials is also a top challenge for many (23% and 15%, respectively).

Renovation-related companies estimate the average total cost of repairs and renovations to homeowners to be $13K for the hardest Irma-stricken areas, and a staggering $111K for the hardest Harvey-stricken areas.

The Barometer posted year-over-year readings of 67 to 75 in the third quarter of 2017, indicating high optimism in continued year-over-year gains in the home renovation market. These scores are in line with Q2 2017 scores (65 to 78). The year-over-year scores for architects increased from 65 in Q2 to 67 in Q3 and are now at the highest level since Q2 2016.