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Houzz Inc., the leading platform for home remodeling and design, today released the Q1 2021 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 Houzz Barometer points to positive sentiment for home renovation activity in the first quarter of the year, albeit tempered among construction businesses.

“Businesses in the home remodeling industry are kicking off the year with cautious optimism,” said Marine Sargsyan, Houzz senior economist. “Favorable interest rates and increased pandemic-related demand for remodeling have given architectural and design firms confidence for Q1 compared with the previous quarter. Yet, construction businesses have tempered their expectations slightly as they continue to face supply chain constraints, labor shortages and increasing costs for materials, such as lumber.”

Q1 2021 Construction Sector Barometer
- The Expected Business Activity Indicator related to project inquiries and new committed projects remained high, though it decreased to 70 in Q1 (compared to 73 in Q4 2020). Expectations for project inquiries are down to 70 compared to 71 in Q4 and new committed projects decreased significantly to 69 (down six points relative to Q4).
- The Project Backlog Indicator increased to 7.4 weeks in Q1 relative to Q4 2020, which is two weeks longer than a year ago (5.4 weeks).
- The Recent Business Activity Indicator related to project inquiries and new committed projects declined substantially to 62 in Q4 (compared to 75 in Q3). This is driven by a decrease in project inquiries, which declined to 62 in Q4 (down 15 points relative to Q3), and by a decrease in new committed projects to 63 (down 12 points relative to Q3).

Q1 2021 Architectural and Design Services Sector Barometer
- The Expected Business Activity Indicator related to project inquiries and new committed projects increased to 68 in Q1 (compared to 62 in Q4 2020). Expectations also increased for project inquiries to 66 and for new committed projects to 71 in Q1.
- The Project Backlog Indicator increased to 5.6 weeks in Q1, which is one week longer than a year ago (4.6 weeks).
- The Recent Business Activity Indicator related to project inquiries and new committed projects increased to 64 in Q4 (compared to 61 in Q3). This is driven by a growth in project inquiries to 64 (up four points in Q4 relative to Q3), and an increase in new committed projects to 64 (up two points relative to Q3).

COVID-19’s Influence on Home Renovation and Design Businesses
“We have observed an increase throughout the pandemic in the adoption of online tools that help residential design and construction firms connect with customers and manage their businesses,” said Liza Hausman, Houzz vice president of Industry Marketing. “The use of online invoicing and payments, for example, has grown steadily over the past few quarters across industry groups, which has been echoed by activity we’re seeing on our Houzz Pro business management and marketing software.”

Architecture and design firms responded to pandemic-related business challenges this quarter by offering video consultations, implementing safety guidelines at the office and worksite, providing remote collaboration tools and sourcing more products online (60, 51, 48 and 43 percent, respectively). Construction businesses implemented new safety guidelines, utilized video consultation tools and sourced more products online (68, 39 and 33 percent, respectively). A growing number of businesses in the architectural and design services as well as construction sectors also adopted online invoicing and payments (39 and 31 percent in Q1 2021, versus 33 and 24 percent in Q3 2020, respectively).

Notes to Editors
The Houzz Renovation Barometer is based on a quarterly online survey sent to a national panel of businesses with an online profile on Houzz. The Barometer keeps a pulse on home renovation market conditions via three distinct indices that track expected, current, and recent business activity in two related industry sectors, the construction sector and the architectural and design services sector.

The Expected Business Activity Indicator is based on survey questions that ask businesses to report whether they expect the number of project inquiries and new committed projects to increase, decrease or stay unchanged in the upcoming quarter relative to the prior quarter. Scores for each component are then computed as a seasonally adjusted diffusion indices on a scale of 0 to 100, with index values over 50 indicating that a greater proportion of firms reported quarter-over-quarter increases than those reporting decreases.

The Recent Business Activity Indicator is based on survey questions that ask businesses to report whether they observed the actual number of project inquiries and new committed projects increasing, decreasing or staying unchanged in the most recent quarter relative to the prior quarter. Scores for each component are then computed as a seasonally adjusted diffusion indices similar to the Expected Business Activity Indicator. Recent Business Activity Indicator scores can be compared to the Expected Business Activity Indicator scores for any given quarter to see whether actual activity met, exceeded, or fell short of expectations.

Finally, the Backlog Indicator is based on survey questions that ask businesses to report wait times in weeks before a company can start work on a new midsize project. Scores are computed as average wait times without a seasonal adjustment.

All three indices are computed individually for two subsectors in the construction sector (build only remodelers and design and build remodelers) and for two subsectors in the architectural and design services sector (architects and interior designers), as well as for nine regions that follow U.S. Census Bureau Divisions. The aggregated national indices are computed using industry subsector weights and regional weights derived from the 2016 U.S. Census County Business Patterns survey. Detailed methodology and underlying quarterly indices for the construction sector and the architectural and design services sector, and other information on market conditions can be found on houzz.com/research.

The Q1 2021 Barometer was fielded January 7 through January 25th, 2021 and garnered responses from nearly 1,600 home improvement firms on Houzz. n=1,588.

About Houzz
Houzz is the leading platform for home renovation and design, providing people with everything they need to improve their homes from start to finish. On Houzz, people can find design inspiration, research and hire home professionals, and shop for products to complete their projects. For home professionals, Houzz Pro (houzz.com/pro) provides an all-in-one software solution that empowers industry pros to stand out, win clients and manage their projects efficiently and profitably. The Houzz community is made up of millions of homeowners, home design enthusiasts and home improvement professionals around the world. Houzz is available on the web and as a top-rated mobile app. Headquartered in Palo Alto, California, Houzz also has international offices in London, Berlin, Sydney, Moscow, Tel Aviv and Tokyo. Houzz is a registered trademark of Houzz Inc. worldwide. For more information, visit houzz.com.