Houzz Study Finds Labor Shortages Drive Higher Project Costs and Longer Timelines for Homeowners

October 18, 2016

Houzz Inc. today released the Q3 2016 Houzz Renovation Barometer, which tracks confidence in the home renovation market among industry professionals. Labor shortages continue to be a challenge, with nearly four in five remodelers and design-build firms reporting moderate to severe labor shortages of skilled trades and general laborers.

Half of general contractors (GCs), remodelers and design-build firms report this is driving increases in costs to hire subcontractors (53 percent), while a third report higher costs due to an increase in compensation for their own employees (37 percent). For consumers, these rising costs translate to increased project costs to clients, as reported by 59 percent of professionals. The amount of time it takes to complete a project has also increased for half of firms. However, very few professionals report a decline in project quality (10 percent) and client satisfaction (11 percent).

The Q3 2016 Barometer reflected widespread quarter-over-quarter confidence for all industry sectors including architects, designers, general contractors/remodelers, design-build, specialty building/renovation and specialty landscape/outdoor, with readings of 60* or higher. The outlook for Q4 continues to be positive for all sectors despite expected seasonal slow down. Architects, designers, design-build companies, GCs and specialty building/renovation firms report scores up to five percent lower than Q2 2016 scores. Landscape/outdoor specialty firms are experiencing a stronger seasonal cooling with a 15 percent drop in confidence.

“The sustained growth in consumer demand for residential remodeling services, as indicated by the Houzz Renovation Barometer, is naturally driving prices for remodeling services up. Yet, with systematic labor shortages and no major shift in labor conditions expected in the near term, consumers will continue to experience significant increases in project costs and difficulty finding qualified remodelers,” said Nino Sitchinava, principal economist at Houzz. “At the same time, remodelers will continue to be squeezed to do more with less, be more selective about the nature of projects they take on and be more cautious about committing to project cost and timeline estimates.”

New Business Growth Continues

The majority of firms continue to report quarter-over quarter increases in both the number of inquiries and the number and size of new projects in the third quarter of 2016. Scores for new inquiries and number of new projects were unchanged or declined by only one to five percent across all industry sectors, other than landscape/outdoor specialties, showing confidence in market gains at the onset of seasonal slowdown.

Year-Over-Year Gains Continue

Year-over-year Barometer readings were high for the third quarter of 2016 (64-77), indicating optimism in continued year-over-year gains in the home renovation market. For GCs, remodelers and design-build firms, confidence held or slightly increased, relative to Q2 2016. Readings increased six percent for designers, but decreased four percent for architects.

There are more than one million active home remodeling and design professionals on Houzz, including architectsinterior designersgeneral contractors and design-build firms.