Industry Research
Outlook Is Mildly Optimistic Among Design and Construction Pros
Business activity and expectations grew, the Q1 2024 Houzz Renovation Barometer shows. Backlogs are at 2019 levels
Businesses across the home design and remodeling industry report that they closed 2023 with improved activity compared with the previous quarter, and they entered the first quarter of 2024 anticipating continued moderate growth. Meanwhile, backlogs are shorter than they were a year ago and have settled to pre-pandemic levels.
Those are the key takeaways from the just-released Q1 2024 Houzz Renovation Barometer, which provides timely insights into the residential renovation industry, including expectations, project backlogs and recent activity among businesses in the construction and architectural and design services sectors.
“Glimpses of optimism are emerging in the construction and design industry, with some easing of interest rates and businesses reporting slight improvements in quarterly activity at the end of the year compared with earlier periods in 2023,” Houzz staff economist Marine Sargsyan says. “Shorter backlogs, comparable to pre-pandemic levels, are likely fueling a rise in new project commitments as we enter the year. Despite persisting labor shortages, industry professionals have adapted, sustaining operations and fulfilling project demands by refining project scope and upskilling their team members.”
Those are the key takeaways from the just-released Q1 2024 Houzz Renovation Barometer, which provides timely insights into the residential renovation industry, including expectations, project backlogs and recent activity among businesses in the construction and architectural and design services sectors.
“Glimpses of optimism are emerging in the construction and design industry, with some easing of interest rates and businesses reporting slight improvements in quarterly activity at the end of the year compared with earlier periods in 2023,” Houzz staff economist Marine Sargsyan says. “Shorter backlogs, comparable to pre-pandemic levels, are likely fueling a rise in new project commitments as we enter the year. Despite persisting labor shortages, industry professionals have adapted, sustaining operations and fulfilling project demands by refining project scope and upskilling their team members.”
A score higher than 50 indicates that more firms have reported an increase in their business expectations than have reported a decrease.
Construction Firms
1. Business activity outlook is favorable. The Expected Business Activity Indicator, related to project inquiries and new committed projects, jumped 10 points to 57 in Q1 2024, compared with 47 in Q4 2023. This indicates that more construction businesses expect growth in the first quarter of 2024 than expect a slowdown. Expectations for project inquiries jumped significantly to 57, compared with 46 in Q4, and new committed projects are at 58, up 11 points relative to Q4 expectations (47).
Optimism is prevalent among both design-build firms and build-only remodelers, with more businesses in each sector anticipating growth than decline. The reported Expected Business Activity Indicator for design-build firms is 59 for Q1, compared with 53 in Q4. Expectations increased even more among build-only remodelers, with the indicator at 56 in Q1, compared with 41 in Q4.
The indicator is based on survey questions about whether businesses expect the number of project inquiries and new projects to increase, decrease or remain unchanged in the coming three months compared with the previous three months.
Construction Firms
1. Business activity outlook is favorable. The Expected Business Activity Indicator, related to project inquiries and new committed projects, jumped 10 points to 57 in Q1 2024, compared with 47 in Q4 2023. This indicates that more construction businesses expect growth in the first quarter of 2024 than expect a slowdown. Expectations for project inquiries jumped significantly to 57, compared with 46 in Q4, and new committed projects are at 58, up 11 points relative to Q4 expectations (47).
Optimism is prevalent among both design-build firms and build-only remodelers, with more businesses in each sector anticipating growth than decline. The reported Expected Business Activity Indicator for design-build firms is 59 for Q1, compared with 53 in Q4. Expectations increased even more among build-only remodelers, with the indicator at 56 in Q1, compared with 41 in Q4.
The indicator is based on survey questions about whether businesses expect the number of project inquiries and new projects to increase, decrease or remain unchanged in the coming three months compared with the previous three months.
2. Wait times are shorter than they were a year ago — and back to pre-pandemic levels. The average backlog across the construction sector is 6.7 weeks nationally, which is 1.6 weeks shorter compared with the same period last year, when it was 8.3 weeks. It’s at the same level as it was five years ago, in Q1 2019.
The Backlog Indicator is based on survey questions that ask businesses to report wait times in weeks before a company can start work on a new midsize project. Scores are computed as average wait times without a seasonal adjustment.
The Backlog Indicator is based on survey questions that ask businesses to report wait times in weeks before a company can start work on a new midsize project. Scores are computed as average wait times without a seasonal adjustment.
Backlogs vary significantly among construction firms in the nine U.S. Census Bureau divisions. Businesses in the New England division (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) report the longest average backlog, at 11.7 weeks, driven by reported wait times of 15.6 weeks for build-only firms and 7.8 weeks for design-build firms. Businesses in the Mountain division (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming) have the shortest average backlog at 3.5 weeks.
Compared with the same quarter one year ago, backlogs for the construction sector are shorter across seven of nine census divisions (across all but the East South Central and the West South Central divisions).
Compared with the same quarter one year ago, backlogs for the construction sector are shorter across seven of nine census divisions (across all but the East South Central and the West South Central divisions).
A score lower than 50 indicates that more firms have reported a decrease in their recent business activity than have reported an increase.
3. Recent business activity improves. For Q4, the Recent Business Activity Indicator related to project inquiries and new committed projects is still below 50, at 48, which shows that more businesses in the construction sector saw a decrease in business activity than saw an increase during the last quarter of 2023. But that’s up 4 points compared with the previous quarter — an improvement driven by increases in both project inquiries (47 in Q4 compared with 43 in Q3) and new committed projects (50 compared with 44 points in Q3).
The Recent Business Activity Indicator looks at actual activity over the previous three months. In contrast with the Expected Business Activity and Project Backlog indicators, which look forward in time, the Recent Business Activity Indicator looks back. It’s based on survey questions about whether businesses observed an increase, a decrease or no change in the actual number of project inquiries and new committed projects over the previous three months relative to the three months prior.
3. Recent business activity improves. For Q4, the Recent Business Activity Indicator related to project inquiries and new committed projects is still below 50, at 48, which shows that more businesses in the construction sector saw a decrease in business activity than saw an increase during the last quarter of 2023. But that’s up 4 points compared with the previous quarter — an improvement driven by increases in both project inquiries (47 in Q4 compared with 43 in Q3) and new committed projects (50 compared with 44 points in Q3).
The Recent Business Activity Indicator looks at actual activity over the previous three months. In contrast with the Expected Business Activity and Project Backlog indicators, which look forward in time, the Recent Business Activity Indicator looks back. It’s based on survey questions about whether businesses observed an increase, a decrease or no change in the actual number of project inquiries and new committed projects over the previous three months relative to the three months prior.
A score higher than 50 indicates that more firms have reported an increase in their business expectations than have reported a decrease.
Architectural and Design Firms
1. Business activity expectations have increased. As in the construction sector, positive sentiment in the architectural and design services sector is stronger for Q1 (at 66) than it was for the previous quarter (61). The overall increase in business activity expectations from Q4 2023 to Q1 2024 is driven by a 5-point rise in expectations for both project inquires and new committed projects, at 66 each.
Breaking it down by reporting group, architects anticipate greater business activity in Q1 than in the previous quarter, with an Expected Business Activity Indicator of 67 compared with 59 in Q4. Interior designers’ indicator is at 63 for Q1 2024, compared with 64 in Q4 2023 — a slight decrease, though the level remains above the 50 mark. That means that, like architects, more interior designers expect an improvement in activity in Q1 than expect a slowdown.
Architectural and Design Firms
1. Business activity expectations have increased. As in the construction sector, positive sentiment in the architectural and design services sector is stronger for Q1 (at 66) than it was for the previous quarter (61). The overall increase in business activity expectations from Q4 2023 to Q1 2024 is driven by a 5-point rise in expectations for both project inquires and new committed projects, at 66 each.
Breaking it down by reporting group, architects anticipate greater business activity in Q1 than in the previous quarter, with an Expected Business Activity Indicator of 67 compared with 59 in Q4. Interior designers’ indicator is at 63 for Q1 2024, compared with 64 in Q4 2023 — a slight decrease, though the level remains above the 50 mark. That means that, like architects, more interior designers expect an improvement in activity in Q1 than expect a slowdown.
2. Wait times are slightly shorter than they were a year ago. Similar to businesses in the construction sector, those in the architectural and design services sector have seen a reduction in wait times before they can begin work on new projects. The latter sector’s Project Backlog Indicator is 5.2 weeks for the beginning of Q1 — 0.1 weeks shorter compared with last year and 0.5 weeks longer than it was five years ago, in Q1 2019, when it was 4.7 weeks.
Wait times diverge between the two reporting groups within the sector, however. Architects’ backlog is at 6.1 weeks (1 week longer than in Q1 2023), and interior designers’ project backlog is at 3.6 weeks (2 weeks shorter that in Q1 2023).
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Wait times diverge between the two reporting groups within the sector, however. Architects’ backlog is at 6.1 weeks (1 week longer than in Q1 2023), and interior designers’ project backlog is at 3.6 weeks (2 weeks shorter that in Q1 2023).
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As in the construction sector, backlogs in the architectural and design services sector vary widely geographically.
Businesses in the West South Central division (Arkansas, Louisiana, Oklahoma and Texas) have the shortest average backlog, at 3.9 weeks. Businesses in the Middle Atlantic division (New York, New Jersey and Pennsylvania) report the longest wait to begin a new project, at 8.1 weeks. The 9.6-week backlog reported by architects in the Middle Atlantic (versus the 5.5 weeks reported by interior designers in the region) are driving that long wait time.
Compared with the same quarter a year ago, backlogs for the architectural and design services sector are shorter across seven of the nine census divisions (across all but the East North Central and West North Central divisions).
Businesses in the West South Central division (Arkansas, Louisiana, Oklahoma and Texas) have the shortest average backlog, at 3.9 weeks. Businesses in the Middle Atlantic division (New York, New Jersey and Pennsylvania) report the longest wait to begin a new project, at 8.1 weeks. The 9.6-week backlog reported by architects in the Middle Atlantic (versus the 5.5 weeks reported by interior designers in the region) are driving that long wait time.
Compared with the same quarter a year ago, backlogs for the architectural and design services sector are shorter across seven of the nine census divisions (across all but the East North Central and West North Central divisions).
A score higher than 50 indicates that more firms have reported an increase in their recent business activity than have reported a decrease.
3. Recent business activity has increased for the fourth consecutive quarter. The overall Recent Business Activity Indicator related to project inquiries and new committed projects for the architectural and design services sector is 54 in Q4 — a 2-point increase from 52 in Q3. Recent project inquiries increased 1 point, to 51, and new committed projects increased to 57 in Q4, up 2 points from 55 in Q3.
Among the two reporting business groups, architects report a 3-point increase, to 54 in Q4 compared with 51 in Q3. Interior designers, meanwhile, report 54 in Q4 compared with 55 in Q3 — a slight decline. Nonetheless, more businesses in both groups saw improvements in activity versus slowdowns.
3. Recent business activity has increased for the fourth consecutive quarter. The overall Recent Business Activity Indicator related to project inquiries and new committed projects for the architectural and design services sector is 54 in Q4 — a 2-point increase from 52 in Q3. Recent project inquiries increased 1 point, to 51, and new committed projects increased to 57 in Q4, up 2 points from 55 in Q3.
Among the two reporting business groups, architects report a 3-point increase, to 54 in Q4 compared with 51 in Q3. Interior designers, meanwhile, report 54 in Q4 compared with 55 in Q3 — a slight decline. Nonetheless, more businesses in both groups saw improvements in activity versus slowdowns.
The Houzz Renovation Barometer is based on a quarterly online survey sent to a national panel of U.S. businesses with online profiles on Houzz. If you’re a pro and would like to offer your insights on market conditions in your area by joining the Barometer panel, please click here.
Read more on this and past Barometer reports (including more detailed subsector and regional data).
Tell us: We’d love to hear how this report compares with your experiences as a pro or as a homeowner. Please share in the Comments.
More for Pros on Houzz
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Read more on this and past Barometer reports (including more detailed subsector and regional data).
Tell us: We’d love to hear how this report compares with your experiences as a pro or as a homeowner. Please share in the Comments.
More for Pros on Houzz
Read more stories for pros
Learn about Houzz Pro software
Talk with your peers in pro-to-pro discussions
Join the Houzz Trade Program
Here’s what remodeling and design industry professionals are saying about residential renovation market conditions.
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