Home Renovation Market Sentiment Mixed Among Home Professionals in Q1, Houzz Barometer Finds

Confidence tempered among residential construction businesses facing pandemic uncertainty, increased lumber prices and labor and material shortages.

02/03/2021
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Houzz Q1 2021 home renovation

Houzz Inc., the platform for home remodeling and design, released the Q1 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 points to positive sentiment for home renovation activity in the first quarter of the year, albeit tempered among construction businesses.  

“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.”

Q1 2021 Construction Sector Barometer

The Expected Business Activity Indicator related to project inquiries and new committed projects remained high, though it decreased to 70 in Q1 (compared to 73 in Q4 2020). Expectations for project inquiries are down to 70 compared to 71 in Q4 and new committed projects decreased significantly to 69 (down six points relative to Q4).

The Project Backlog Indicator increased to 7.4 weeks in Q1 relative to Q4 2020, which is two weeks longer than a year ago (5.4 weeks).

The Recent Business Activity Indicator related to project inquiries and new committed projects declined substantially to 62 in Q4 (compared to 75 in Q3). This is driven by a decrease in project inquiries, which declined to 62 in Q4 (down 15 points relative to Q3), and by a decrease in new committed projects to 63 (down 12 points relative to Q3).

Q1 2021 Architectural and Design Services Sector Barometer

The Expected Business Activity Indicator related to project inquiries and new committed projects increased to 68 in Q1 (compared to 62 in Q4 2020). Expectations also increased for project inquiries to 66 and for new committed projects to 71 in Q1. 

The Project Backlog Indicator increased to 5.6 weeks in Q1, which is one week longer than a year ago (4.6 weeks). 

The Recent Business Activity Indicator related to project inquiries and new committed projects increased to 64 in Q4 (compared to 61 in Q3). This is driven by a growth in project inquiries to 64 (up four points in Q4 relative to Q3), and an increase in new committed projects to 64 (up two points relative to Q3).

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

“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,” said 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 responded to pandemic-related business challenges this quarter by offering video consultations, implementing safety guidelines at the office and worksite, providing remote collaboration tools and sourcing more products online (60, 51, 48 and 43 percent, respectively). Construction businesses implemented new safety guidelines, utilized video consultation tools and sourced more products online (68, 39 and 33 percent, respectively). A growing number of businesses in the architectural and design services as well as construction sectors also adopted online invoicing and payments (39 and 31 percent in Q1 2021, versus 33 and 24 percent in Q3 2020, respectively). 

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