Expectations for the first quarter remain positive among residential renovation professionals, according to the Q1 2020 Houzz Renovation Barometer. Houzz’s quarterly barometer tracks renovation market expectations, project backlogs, and recent activity among businesses in both the construction sector and architectural and design services sector.
Significant delays to projects in 2019 due to weather, among other factors, has businesses optimistic about projects spilling over into the first half of 2020, according to Houzz principal economist Nino Sitchinava. While businesses are optimistic and confident, economic and political uncertainty, high product and material costs, and the skilled labor shortage continue to be big concerns for businesses heading into 2020.
“Small businesses in the construction sector and architectural and design sector are heading into 2020 on a positive note, with expectations in line with last year and project backlogs already a few days longer than three months ago,” Sitchinava said.
The Renovation Barometer is based on a quarterly online survey to businesses with online profiles on Houzz. The barometer reports on the renovation market via its three indices: the Expected Business Activity Indicator, the Recent Business Activity Indicator, and the Project Backlog Indicator.
In the construction sector, the Expected Business Activity Index—related to project inquiries and new committed projects—remained steady at a reading of 74 in the first quarter. The index was down one point from the first quarter reading in 2019. Expectations declined slightly among build-only remodelers while expectations remained steady for design-build remodelers. The construction sector Recent Business Activity Index—related to project inquiries and new committed projects in the most recent quarter—increased one point from the previous quarter, but was down five points on a year-over-year basis. Project inquiry activity remained steady in the quarter while new committed projects experienced a slight increase. Build-only remodelers reported a decrease in recent activity while design-build remodelers reported an increase.
The construction sector Project Backlog Indicator increased marginally to 5.4 weeks nationally at the start of the first quarter in 2020. Project backlogs in the construction sector are down 1.3 weeks from the first quarter in 2019. Backlogs increased 0.8 week on average from the fourth quarter for build-only remodelers and project backlogs decreased 0.4 week for design-build remodelers from the previous quarter. The East South Central Census division reported the shortest project backlogs—3.4 weeks on average—while the Pacific region reported the longest project backlogs—6.6 weeks.
For architects and designers, the Expected Business Activity Indicator increased one point from the fourth quarter, driven by higher expectations for new committed projects. The Recent Business Activity Indicator increased five points from the previous quarter as a result of both more project inquiries and new committed projects. The Project Backlog Indicator for architects and designers increased 0.5 week from the fourth quarter to 4.6 weeks on average nationally.
The Q1 2020 Houzz Renovation Barometer gathered responses from 1,484 professional Houzz users, including 218 build-only remodelers and 529 design-build remodelers. The Expected Business Activity and Recent Business Activity Indicators are computed on a seasonally adjusted index of 0 to 100, with index values over 50 indicating a greater proportion of respondents reporting quarterly increases in project inquiries and new committed projects than those reporting decreases. All indices are computed individually for the sectors as well as for the nine Census Bureau regions using industry subsector and regional weights derived from the 2016 U.S. Census County Business Patterns Survey. The Project Backlog Indicator, based on wait times on the start date for midsize projects, is reported without seasonal adjustments.
