Expectations for continued demand are tempered among construction professionals as homeowners await signs of national economic stability, according to the Q3 2022 Houzz Renovation Barometer released by remodeling an design platform Houzz Inc.. Meanwhile, following record high wait times before professionals can begin work on a new midsize project, businesses report that backlogs are decreasing across the industry.
The Barometer, which was fielded from June 30 through July 11, 2022, provides timely insights into the impact of recent economic volatility on the home renovation market.
“Following the strong residential remodeling and design activity of the past two years, it’s unsurprising that businesses are leveling their expectations as current economic conditions now impact both sides of the industry,” said Marine Sargsyan, Houzz staff economist. “Rising interest rates and inflation have put downward pressure on homeowners' demand for professional services in the short term, giving pros an opportunity to clear up lengthy backlogs. That said, homeowners managing the demands of aging housing stock and housing market shortages will continue to drive home renovation and design activity in the long run.”
In the construction industry, build-only and design-build professionals are aligned on anticipated business performance and recent business activity. As project inquiries declined significantly in Q2 2022 among the two business groups, both have lowered their expectations for new committed projects in Q3 2022. Regionally, expectations for business activity are highest among New England firms (69), and lowest among professionals in the Pacific division (46).
- The Expected Business Activity Indicator related to project inquiries and new committed projects decreased to 62 in Q3 (compared to 67 in Q2). Expectations for project inquiries declined to 62, compared to 65 in Q2, and new committed projects reduced to 63, down six points relative to expectations in Q2 (69).
- The Project Backlog Indicator is 10.5 weeks in the beginning of Q3, a return to similar wait times from a year ago after reaching a five-year peak in Q2 (12 weeks).
The Recent Business Activity Indicator related to project inquiries and new committed projects declined to 63 in Q2. This reflects an eight point drop from Q1, however it is five points higher than the same period prior to the pandemic (58 in Q2 2019). This is driven by a 10-point decline in project inquiries in Q2, relative to the previous quarter, and by a decrease in new committed projects to 65 (72 points relative to Q1 2022).
Backlogs continue for the construction sector. The New England division (including Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) has the longest backlog (13.8 weeks) driven primarily by build-only firms in the region (14.4 weeks), while design-build remodelers report 13.3 week wait times. Businesses in the Mountain division (which includes Arizona, Colorado, Idaho, Montana, New Mexico, Nevada, Utah and Wyoming) report backlogs of 9.2 weeks before they can begin a new project, the shortest wait time reported by construction firms among the nine Census divisions. Compared to the same quarter one year ago, backlogs for the construction sector are longer across five of the nine Census divisions (East South Central, Middle Atlantic, Mountain, New England and West South Central divisions).