Houzz released the Q1 2021 Houzz Renovation Barometer, which points to positive sentiment for home renovation activity in the first quarter of the year. Remodeling professionals expressed tempered hope about their business prospects for the first three months of the year, new data from Houzz shows. Their sentiment is split by industry sector, with design and architecture firms expressing greater optimism than they did at the end of last year, while construction businesses offer less. Given market conditions, that split is understandable.
“Businesses in the home remodeling industry are kicking off the year with cautious optimism,” said Marine Sargsyan, Houzz senior economist. “Favorable interest rates and increased pandemic-related demand for remodeling have given architectural and design firms confidence for Q1 compared with the previous quarter. Yet, construction businesses have tempered their expectations slightly as they continue to face supply chain constraints, labor shortages and increasing costs for materials, such as lumber.”
The Q1 2021 Houzz Renovation Barometer looks at first-quarter residential renovation market expectations, project backlogs and recent business activity among firms in the construction and architectural and design services sectors, based on responses from 1,588 small businesses on Houzz. The survey was fielded Jan. 7 through Jan. 25.
“We have observed an increase throughout the pandemic in the adoption of online tools that help residential design and construction firms connect with customers and manage their businesses,” says Liza Hausman, Houzz vice president of Industry Marketing. “The use of online invoicing and payments, for example, has grown steadily over the past few quarters across industry groups, which has been echoed by activity we’re seeing on our Houzz Pro business management and marketing software.”
Architecture and design firms have responded to the pandemic with safety guidelines and remote-collaboration tools, and a growing number of businesses in the architectural and design services, as well as the construction sector, have adopted online invoicing and payments (39% and 31%, respectively, in Q1 2021, versus 33% and 24% in Q3 2020).
1. Expectations for business activity decreased somewhat
Build-only remodelers and design-build remodelers reported slightly lowered expectations for business activity going into the first quarter of 2021 compared with the previous quarter. The Expected Business Activity Indicator decreased from 73 to 70 for Q1. However, that level is still significantly up from the all-time low of 18 seen at the start of the second quarter of last year, in the early days of the pandemic.
One year ago, the national average wait time was 5.4 weeks, meaning the average wait time has risen by 2 weeks year over year.
Among construction firms, design-build remodelers have the longest average wait time before they can take on a midsize project: 8 weeks, up 0.9 week from the start of the prior quarter. Wait times for build-only remodelers average 6.8 weeks, down 0.5 week compared with the start of the previous quarter.
2. Project wait times rose nationally.
With demand for their services strong amid the pandemic,construction businesses that are focused on remodelingreported that wait times before they can take on a midsize project from a new client now average 7.4 weeks, up 0.2 week compared with the start of the previous quarter.
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 (5.2 weeks), while the East North Central division (Illinois, Indiana, Michigan, Ohio, Wisconsin) has the longest (9.2 weeks) among the nine geographic divisions as defined by the U.S. Census.
3. Recent business activity decreased significantly
A decrease in new project inquiries and new committed projects in October, November and December pushed the Recent Business Activity Indicator of the Barometer to 62 for construction firms, down 13 points from the previous quarter. Both build-only remodelers and design-build remodelers reported a significant decrease in recent business activity over this period. Relative to a year ago, this indicator is down 3 points.
Architectural and Design Services Firms
1. Business activity expectations increased.
Architects and interior designers reported higher expectations for new business activity for the first quarter of 2021 compared with the start of the previous quarter. Their score of 68 for the Expected Business Activity Indicator shows that more firms are expecting increases in new business activity than are expecting decreases. This measure is up 6 points from the start of Q4 2020, when it was 62. The score now stands where it did one year ago.
2. Wait times increased nationally.
The Project Backlog Indicator for architectural and design firms averages 5.6 weeks nationally at the start of the first quarter of 2021, up 1.1 weekscompared with the start of Q4 2020.
Compared with a year ago, when wait times were 4.6 weeks, wait times are up 1 week.
Methodology, and underlying quarterly indices and graphs are available for the construction sector here and the architectural and design services sector here.