Surveys Suggest Homeowners Delaying Renovations
The market outlook of remodelers, home builders and home improvement contractors continues to become more cautious amid signs of homeowners delaying renovations due to rising costs, according to two recent surveys.
On Jan. 10, the Houzz Expected Business Activity Indicator for the construction sector fell seven points, or 8.8 percent below year ago levels. Houzz Project Backlog Indicator increased slightly to 4.8 weeks nationally, up 0.3 weeks relative to the fourth quarter, but the overall backlog came in 1.7 weeks below a year earlier. Finally, Houzz’s Recent Business Activity Indicator related to project inquiries and new projects reported by construction firms surveyed increased five points to 67 in Q4.
The indices are components of the Houzz Renovation Barometer, which is designed to be nationally representative of business activity related to work performed on owner-occupied existing homes, as reported by remodelers, design and build remodelers, and specialty trade contractors who report that in the last 12 months at least 20 percent of their revenues came from residential remodeling services. Houzz prepares similar indices based on responses from residential architects and interior designers, as well as for nine regions that follow the U.S. Census Bureau Divisions.
“Current Barometer readings and qualitative feedback reflect a mixed degree of caution about market conditions among contractors, architects and designers,” said Nino Sitchinava, Houzz principal economist. “It is notable that, relative to a year ago, expectations and recent activity among contractors are more subdued and project backlogs are considerably lighter. In contrast, the sentiments and backlogs of architects and designers are on par with a year ago, likely explained by a boost in new business activity in the last quarter of 2018. That said, businesses overwhelmingly cite rising costs of products and materials and homeowners delaying renovations due to these costs.”
Echoes of GuildQuality Q4 survey results
The results come two months after GuildQuality reported that 17.1 percent of the home improvement contractors who responded to its 2018 Fourth Quarter Market Predictions Survey said they expected the market to “Significantly Decline” or “Decline” in the fourth quarter, up from just 3.6 percent a quarter earlier.
That was the highest percent recorded since GuildQuality, which provides contractors with customer satisfaction surveying software, began surveying its own customers in 2008. At 20.8 percent, the number of respondents who said they expected the market to “Improve” or “Significantly Improve” was the lowest it’s been since quarter three of 2011.
GuildQuality says it sent the survey to its more than 2,500 members, but did not specify how many responded. The company helps home improvement contractors survey customers and prospective customers to gain market insights, improve customer service, generate customer reviews and close more sales.
The shift in sentiment came even as respondents’ perception of current market conditions remained stable. Nearly 85 percent said the current state of the market was “Good” or “Excellent.” That was up 1.7 percent from quarter three of 2018 and down 1.8 percent from quarter four of 2017. Compared to quarter three of 2018, the percent of respondents who selected “Poor” or “Horrible” to describe the current state of the market in the fourth quarter of 2018 remained flat at 1.2 percent.
When asked what new or existing trends they saw more of in the industry in the fourth quarter of 2018, respondents identified the same three general trends as they had in the third quarter, including:
- Exterior additions (e.g., sunrooms and decks).
- High-quality products at affordable prices.
- Rustic finishes and gray tones.
Respondents identified the following as trends they believe are on the way out:
- Granite countertops — Quartz is popular now.
- Formal dining spaces and master bathtubs.
In addition to focusing on new recruiting techniques to address the ongoing challenge of hiring skilled employees, respondents named the following near-term strategic priorities:
- Online marketing efforts.
- Soliciting and evaluating customer feedback.
- Tech integrations for better communication.
In the fourth quarter of 2018, many respondents reported focusing on the following customer relationship management strategies:
- Building strong referral relationships.
- Improved customer service.
- Year-round recruiting.