Renovation Activity Expected to Remain Strong in Q4
October 20, 2021 from Floor Focus FloorDaily.net News
Palo Alto, CA, October 20, 2021-The Q4 2021 Houzz Renovation Barometer found that businesses anticipate strong activity through the end of the year. With steady increases in backlogs since the beginning of the pandemic, construction professionals in particular report wait times of nearly three months before new projects can begin. The Houzz Renovation Barometer tracks residential renovation market expectations, project backlogs and recent activity among U.S businesses in the construction sector and the architectural and design services sector.
“Confidence prevails across the industry through year-end despite the Expected Business Activity Indicator dipping slightly compared with the very high level last quarter,” said Marine Sargsyan, Houzz senior economist. “We’ve seen some settling of home renovation and design activity following record high performance earlier in the year. Yet many businesses are struggling to catch up with heightened demand as they navigate supply chain challenges and labor availability, leading to record-long backlogs.”
Q4 2021 Construction Sector Barometer
In the construction industry, build-only remodelers and design and build remodelers are aligned in their reporting of recent and anticipated business performance.
* The Expected Business Activity Indicator related to project inquiries and new committed projects decreased to 74 in Q4 (compared to 76 in Q3). Expectations for project inquiries declined to 73 compared to 79 in Q3, while new committed projects rose slightly to 74 (up one point relative to Q3).
* The Project Backlog Indicator increased to 11.7 weeks in Q4, which is more than a month longer than a year ago (7.2 weeks). Wait times are double those reported in Q4 2019 (5.2 weeks).
* The Recent Business Activity Indicator related to project inquiries and new committed projects dropped significantly to 73 in Q3 (compared to 82 in Q2). This is driven by a decline in project inquiries, which decreased substantially to 71 in Q3 (down 13 points relative to Q2), and by a decline in new committed projects to 75 (down six points relative to Q2). Despite this drop, the recent business activity is much stronger than it was two years ago (63 in Q3 2019).
Q4 2021 Architectural and Design Services Sector Barometer
Responses for recent and anticipated performance diverge somewhat among the two subsectors of architectural and design services. Architects have a positive outlook, anticipating an increase in project inquiries and new committed projects. Interior designers’ optimism about Q4 is tempered, reporting lower expectations than last quarter for project inquiries and new committed projects.
* The Expected Business Activity Indicator related to project inquiries and new committed projects decreased by one point to 69 in Q4 (compared to 70 in Q3). Expectations remained the same for project inquiries at 70 in Q4, and slightly declined for new committed projects to 68 in Q4 (compared to 70 in Q3).
* The Project Backlog Indicator reached 9.3 weeks in the beginning of Q4, which is more than a month longer than a year ago (4.5 weeks). Long wait times are driven by the highest reported backlogs by architectural firms (11.1 weeks in Q4) since the Houzz Barometer began tracking this information in July 2017.
* The Recent Business Activity Indicator related to project inquiries and new committed projects declined slightly to 70 in Q3 (compared to 72 in Q2), while significantly higher than business activity reported since 2016. Project inquiries remained steady at 74, while there is a decrease in new committed projects to 66 (down five points relative to Q2).
Costs and Shortages Impacting Home Renovation and Design
More than half of firms in both the construction and architectural and design services sectors report challenges with product and material shortages and increased costs as of the beginning of Q4.
* While only half of businesses anticipated heightened costs for raw materials, such as lumber, copper, steel, plastic and aluminum, more than two-thirds reported that these materials actually increased in cost over the past quarter. Following recent price hikes for lumber, only two in five businesses expect that costs will continue to rise through the end of the year. Alternatively, pros seem to be more concerned about the rise of steel prices going into Q4.
* More than nine in ten construction businesses reported moderate to severe skilled labor shortages in Q4 (91%). While fewer pros reported shortages across all categories this quarter than in Q3, carpenters, laborers, framers and cabinet specialists continue to be in shortest supply (52%, 43%, 36% and 35%, respectively). Availability for cabinet specialists has been particularly impacted with an increase of 14 percentage points since 2019 (35% versus 21%, respectively). Conversely, shortages for drywallers, plumbers, concrete specialists, flooring specialists and roofers saw six or more percentage point decreases from Q3.