Home Renovation Professionals Bullish on 2017, Houzz Study Finds
January 18, 2017
Houzz Inc. today released the 2017 State of the Industry. The report provides an overview of 2016 performance and an outlook on 2017 for residential renovation and design businesses based on data reported by more than 4,800 professionals in the Houzz community. The majority of firms anticipate revenue and profit growth in 2017, following a very strong year in 2016. Houzz also released today the Q4 2016 Houzz Renovation Barometer, which shows continued year-over-year and quarter-over-quarter market improvements across all industry groups.
“Based on some estimates, residential remodeling activity in 2016 surpassed the pre-recession peak, and by far outpaced the recovery of the new residential construction sector. Several market fundamentals propelled this expansion, including aging housing stock, recovered home prices, homeownership and home buying concentrated in older and more established households, and finally a massive Baby Boomer population planning retirement in current homes, among others,” said Nino Sitchinava, principal economist at Houzz. “Houzz research finds that the steady growth of the residential remodeling spend is driven by homeowners tackling multiple projects at a time, embarking on projects with a large scope, and/or installing high end finishes. This trend is likely continue into 2017.”
2017 State of the Industry: Major Findings
- Bullish on 2017. The majority of home renovation and design businesses on Houzz anticipate more widespread revenue growth in 2017 than they experienced in 2016. Businesses expect their annual gross revenue to grow 10-12 percent on average, compared to 8-10 percent in 2016. Architects are the exception, anticipating seven percent growth in 2017, in line with 2016 expectations. The majority of firms also anticipate profit to grow in 2017 (69-76 percent), again with architects less bullish (57 percent).
- Investing in growth. To support revenue growth in 2017, firms across all industry groups plan to focus on larger budget projects (50-63 percent) and to invest more in marketing (45-56 percent). Other common strategies include increasing fees, improving employee productivity and hiring more staff. Company headcounts are also expected to rise in 2017 for two in five general contractors, design-build firms, specialty building and renovation firms (40-46 percent), and one in four design-focused companies including architects, designers and decorating firms (23-26 percent).
- 2016 a banner year. A third or more of firms across industry groups report that 2016 was the best year in the past 10 years (since 2007). Two-thirds report an increase in revenue in 2016 (63-70 percent), and more than half report an increase in profits (53-59 percent). Overall, companies report more moderate average annual rates of revenue growth in 2016 (7-10 percent) compared to 2015 (9-11 percent) and 2014 (10-13 percent).
- Rising labor & materials costs. While revenue increased in 2016, the cost of business also increased, according to three in five or more companies across industry groups (58-76 percent), primarily driven by cost of labor and products and materials. Other commonly cited cost drivers are advertising and marketing expenses, subcontractor fees and business insurance premiums. Rising business costs were among the top business challenges in 2016 cited by companies in nearly every industry group, along with shortage of employees or subcontractors and managing consumer expectations and budget concerns.
Q4 2016 Houzz Renovation Barometer: Continued Optimism in Renovation Market Gains
The Q4 2016 Barometer, which tracks industry optimism in year-over-year and quarter-over-quarter market improvements, posted high year-over-year readings of 61 or higher across industry groups, indicating high optimism in continued gains in the home renovation market. The greater the index value relative to 50, the greater the proportion of firms reporting year-over-year increases in quarterly business activity than those reporting decreases.
Additionally, Houzz Renovation Barometer posted quarter-over-quarter readings of 54 or higher points across all industry groups (54-67 out of 100). Typical seasonal cooling is reflected in Q4 2016 scores being 6 percent to 14 percent lower than Q3 2016 scores for most industry groups, while still being comparable to the scores during the same period in 2015. This seasonal slowdown is felt across all regions and most industry sectors, although slightly less so for firms in the West and South. The Houzz Renovation Barometer posted high quarter-over-quarter readings for Q1 2017 (72-78), however, reflecting widespread optimism for the new year.
February 20, 2017 | Business
Jacuzzi Luxury Bath Announces Partnership with BathWraps