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Houzz study shows COVID-19’s impact on home renovation market

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Houzz study shows COVID-19’s impact on home renovation market
istock.com/Nevena Ristic

Palo Alto, Calif. — Houzz Inc., the  platform for home remodeling and design, has released its Q2 2020 Houzz Renovation Barometer, which tracks residential renovation market expectations, project backlogs and recent activity among businesses in the construction sector and the architectural and design services sector in the U.S. The Barometer, which was fielded from March 26 to April 8, 2020, provides insights into the impact of COVID-19 on the home renovation market.

“Despite beginning the year confidently, with a long backlog of work and high expectations, firms in the residential construction sector and the architectural and design services sector have experienced a sudden, dramatic shift in the wake of the COVID-19 pandemic,” said Marine Sargsyan, Houzz senior economist. “For the first time since launching the Houzz Barometer in 2015, a greater proportion of firms reported quarter-over-quarter decreases than those reporting increases. Faced with unprecedented challenges, residential construction, architecture and design firms are adopting business practices including new safety guidelines, remote collaboration tools, and online consultations, invoicing and payments.”

COVID-19’s influence on home renovation and design businesses

More than four in five small businesses in the architectural and design services sector and the construction sector have been impacted by the coronavirus pandemic (84% each), while one in seven anticipate a future impact (15% and 13%, respectively). Of those businesses currently impacted by the pandemic, the most common effects include project delays (75% and 78%, respectively), fewer new business inquiries (75%, each) and project cancellations (61% and 63%, respectively).

Architecture and design firms responded to pandemic-related business challenges by offering video consultations and remote collaboration tools, and sourcing more products online (49%, 48%, and 34%, respectively). Construction businesses implemented new safety guidelines, temporarily closed offices or storefronts, and deferred hiring new employees (57%, 34%, and 33%, respectively). More than a quarter of businesses in the architectural and design services sector and the construction sector also adopted online invoicing and payments (30% and 27%, respectively).

While short term indicators report a severe immediate impact on the home improvement market due to the coronavirus pandemic, a neutral to good outlook for 2020 prevails among both the architectural and design services and construction sectors (56 and 66 percent, respectively).

Q2 2020 construction sector barometer

The Expected Business Activity Indicator related to project inquiries and new committed projects declined significantly to 18 in Q2 (compared to 74 in Q1). Both expectations for project inquiries and new committed projects were 18.

The Project Backlog Indicator remained steady at 5.4 weeks in Q2 relative to Q1, which is 1.1 weeks shorter than a year ago.

The Recent Business Activity Indicator related to project inquiries and new committed projects decreased to 48 in Q2 (compared to 65 in Q1). This decline is driven by both project inquiries, which dropped to 46 in Q2 (down 21 points relative to Q1), and new committed projects, which declined to 50 (down 12 points relative to Q1).

Houzz Q2 2020 architectural and design services sector barometer

The Expected Business Activity Indicator related to project inquiries and new committed projects decreased dramatically to 35 in Q2 (compared to 68 in Q1). Expectations also decreased for project inquiries at 31 and for new committed projects at 39 in Q2.
The Project Backlog Indicator decreased to 3.6 weeks in Q2 (relative to 4.6 weeks in Q1), which is 1.1 weeks shorter than a year ago.

The Recent Business Activity Indicator related to project inquiries and new committed projects decreased to 44 in Q2 (compared to 62 in Q1). This decline is driven by both project inquiries, which dropped to 39 (down 24 points in Q2 relative to Q1), and new committed projects, which declined to 50 (down 10 points relative to Q1).