Outlook Seen Softening in Face of Inflation, Other Headwinds

by Anita Shaw

PALO, ALTO, CA — While architecture and design professionals remain confident about business prospects, their outlook has “softened slightly,” with expectations declining somewhat for project inquiries and new committed projects, and backlogs reaching upward of three months.

That’s the key conclusion of the Q2 2022 Houzz Renovation Barometer, a quarterly gauge of residential renovation market expectations, project backlogs and recent activity among U.S. businesses in the construction, architectural and design services sectors. The findings were based on a recent survey of more than 1,000 home improvement firms on Houzz.

“While business activity and the confidence in demand for construction and design services has been the strongest that we’ve seen in the last four quarters, industry professionals are cautious about expected Q2 performance,” said Marine Sargsyan, staff economist for the Palo Alto, CA-based online platform for home remodeling products and services.

“Pros anticipate some impact on project inquiries due to inflation, supply chain delays and rising costs for materials, such as lumber, aluminum, and even gasoline, Sargsyan said, adding, however, that “lengthy backlogs persist … signaling continued home renovation and design activity.”

Backlogs continue to grow across the industry, with the time before pros can begin work on a new, mid-sized project lengthening further across the country, according to Houzz, noting that wait times are the longest when compared to the start of any year since 2018. Backlogs vary significantly by geography but are longer in Q2 2022 than they were in Q2 2021 across all nine U.S. Census divisions, Houzz added.

Houzz, in its recently released “2022 Houzz U.S. State of the Industry Report,” found that, despite current challenges, companies across all sectors of the residential renovation and design trade “have a confident outlook,” with more than two-thirds anticipating that demand for their services will continue to increase.

Other key Houzz conclusions were:

  • Revenue growth surpassed expectations in 2021: In 2021, businesses reported their highest year-over-year revenue growth in the last four years. Three quarters of companies across all business sectors reported that revenue growth was at or above their initial expectations for 2021.
  • Hiring is on the rise: More residential renovation and design companies hired employees in 2021 than in 2020, with hiring expected to continue across all industry groups in 2022.
  • Labor shortages impact cost: Companies expect skilled worker availability to worsen in 2022, increasing the cost of labor.
  • Price volatility and availability of products and materials top challenges: All industry groups listed price volatility of products and materials as a top challenge, with more than half of surveyed companies expecting product and material costs to rise this year.

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