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Source: www.remodeling.hw.net, July 2020

Nearly all business indicators for construction firms and architecture and design firms returned to pre-pandemic levels, according to the Houzz Renovation Barometer.

During the peak months of the coronavirus (COVID-19) pandemic, the virus had a significant impact on residential renovation expectations. In its second quarter Renovation Barometer report, Houzz found a greater proportion of firms reporting quarter-over-quarter decreases in business than those reporting increases. The latest report, the Q3 2020 Houzz Renovation Barometer, finds that nearly all business indicators have returned to pre-pandemic levels and businesses have a more positive outlook than they had at the beginning of the pandemic. The quarterly barometer from Houzz tracks market expectations, project backlogs, and recent activity in both the construction sector and architectural and design services sector.

“Confidence has returned to the home renovation and design industry, with many more businesses showing a positive outlook for 2020 than just a few months ago,” Marine Sargsyan, Houzz senior economist, said in a press release. “Home professionals are finding ways to move projects forward with new safety guidelines, remote collaboration tools, and online consultations, invoicing and payments.”

Despite a return in business indicators and optimism, more than four in five small businesses in both tracked sectors have been impacted by COVID-19, according to Houzz. Project delays, fewer new business inquiries, and project cancellations are the most common negative effects from COVID-19 reported by firms. Additionally, shipment delays or cancellations are a growing concern for both construction firms and architectural and design services firms, according to Houzz.

To combat pandemic-related business challenges, architecture and design firms began offering video consultations, providing remote collaboration tools, sourcing more products online, and implementing safety guidelines at the office and worksite. Construction firms implemented new safety guidelines, utilized video consultation tools, and sourced more products online in response to COVID-19. More than a quarter of businesses in the architectural and design services sector and the construction sector also adopted online invoicing and payments for clients.

Despite continued headwinds from the coronavirus, pricing and availability issues related to materials, and labor shortages, more businesses in the construction sector and architectural design sector reported a neutral to good outlook for 2020 compared with the previous quarter, according to Houzz.

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—increased significantly to 75 in the third quarter, compared with 18 in the second quarter. The rebounded index reflects strong increases in both project inquiries and new committed projects for both design-build remodelers and build-only remodelers. The construction sector Recent Business Activity Index—related to project inquiries and new committed projects in the most recent quarter—increased one point to 49 compared with the second quarter. Build-only remodelers reported an increase in recent business activity while design-build remodelers reported a decrease in recent activity during the previous quarter.

The construction sector Project Backlog Indicator increased nearly a full week to 6.2 weeks nationally in the third quarter. The average backlog is 1.3 weeks longer than a year ago, according to Houzz. Backlogs increased marginally for build-only remodelers (5.4 weeks in Q3 compared with 5.0 weeks in Q2) and increased significantly for design-build remodelers (7.0 weeks in Q3 compared with 5.8 weeks in Q2). Backlogs for construction firms were the lowest in the West South Central census region and highest in the East North Central census region.

For architects and designers, the Expected Business Activity Indicator increased significantly to 67 in the third quarter as a result of increased project inquiries and new committed projects. The Recent Business Activity Indicator increased four points from the previous quarter, driven by a growth in project inquiries. The Project Backlog Indicator increased 0.9 weeks to 4.5 weeks in the third quarter, only 0.2 weeks shorter than the average backlog in the third quarter of 2019.

The Q3 2020 Houzz Renovation Barometer gathered responses from 2,035 professional Houzz users, including 351 build-only remodelers and 706 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.