This year, the Q3 Renovation Barometer reflected high quarter-over-quarter confidence for all industry sectors including design-build, architects, designers, specialty building/renovation and specialty landscape/outdoor and general contractors (GCs)/remodelers, with readings of 62 or higher. Houzz says that expectations for Q4 are strong across all sectors.
As reported by 78 percent of GCs, design-build firms and remodelers, this positive business outlook is coupled with persistent labor shortages. Increased cost of subcontractors was reported by 56 percent of renovation firms in Q3 2017 (versus 53 percent in Q3 2016), and 54 percent reporting increasing project lengths (versus 50 percent in Q3 2016) due to labor shortages.
With project backlogs of five to eight weeks on average across sectors, the Houzz Renovation Barometer Backlog Index increased slightly from Q2 2017 to Q3 2017. This, Houzz says, reflects significant wait times before companies can take on new projects.
According to Houzz, remodelers, design-build companies and GCs typically have the longest average backlogs (7.1 and 7.7 weeks, respectively).
“Residential renovation and design professionals report another strong quarter of new business activity and a very positive outlook in the near term,” said Nino Sitchinava, principal economist at Houzz. “That said, widespread skilled labor shortages leave little wiggle room for businesses to absorb sudden demand pressures such as recent hurricanes in the South or more localized damage from wildfires in the West, driving up wait times.”
Impact of hurricanes
With the recent destruction of Hurricanes Harvey and Irma, Houzz decided to take a look at conditions among renovation professionals in the Houston metropolitan area and Southwestern Florida.
Houzz reports that the hurricanes caused 28 percent of renovation-related businesses in the Houston metropolitan area and 41 percent in Southwestern Florida to suspend operations in these areas within the first two weeks of landfall.
Of the companies that suspended operations, Houzz reports that 91 percent of those impacted by Hurricane Harvey kept their doors closed for a week or longer, and 65 percent of those affected by Hurricane Irma did the same.
The hurricanes only added to the labor shortages across the region, and increased project backlogs by nearly two weeks on average. Houzz states that the top business challenges exacerbated by the hurricane disruption were the following: shortage of contractors, 38 percent for both Irma and Harvey-stricken areas; managing consumer expectations, 23 and 31 percent respectively; and managing cost-concerned customers, 23 and 46 percent respectively.
Another top challenge Houzz reports is a shortage of products and/or materials (23 and 15 percent respectively).
According to Houzz, renovation-related companies estimate the average total cost of repairs and renovations to homeowners to be $13K for the hardest Irma-stricken areas, and a staggering $111K for the hardest Harvey-stricken areas.