Houzz Inc. has released Q1 2022 Houzz Renovation Barometer, which found that the level of confidence among construction professionals is at its highest level since 2018. Confidence among architectural and design companies has increased one point from Q1 2021. Recent business activity remains high, despite a small decommissioning from the top in early 2021. Expected project requests are among the highest recorded for the construction sector in the history of the barometer “Confidence among companies in the housing construction and design industry has been high since the first shock of the pandemic and continues into 2022,” Economist at Houzz. “Companies are facing product and material shortages and price volatility, labor shortages and fluctuations in interest rates, which may affect the latest business activity indicator.
Q1 2022 Construction sector barometer
In the construction industry, construction professionals are tailored to expected business results, although sentiment differs from the most recent business activity for the fourth quarter of 2021. While buildable builders report slower activity compared to the third quarter, design companies experienced a slight increase in Q4 2021 activity compared to previous quarter.
The indicator for expected business activity related to project inquiries and new committed projects increased to 79 during Q1 (compared with 74 during Q4 2021). Expectations of project requests increased markedly to 80 compared to 73 during the fourth quarter of 2021, and new committed projects rose to 78 (an increase of four units compared to the fourth quarter of 2021).
Project Backlog Indicator reached 11.4 weeks in Q1, which is more than a month longer compared to the same period a year ago (7.4 weeks).
The indicator for recent business activity related to project inquiries and new committed projects dropped markedly to 65 during Q4 (compared with 73 during Q3). This is driven by a reduction in project requests, which decreased to 66 during Q4 (down five points compared to Q3), and by a significant reduction in new committed projects to 64 (down nine points compared to Q3). After reaching its record high activity during the second quarter of 2021, recent business activity has steadily converged to pre-pandemic levels (65 during the fourth quarter of 2019).
Q1 2022 Architectural and Design Services Sector Barometer
The companies’ profit expectations differ somewhat between the sub-sectors for architectural and design services. Interior architects expressed optimism for the business during Q1 and reported higher expectations than last quarter for project inquiries and new committed projects. Architects have curbed their views and anticipated reductions in project requests and new committed projects. Both groups report slower business activity during the fourth quarter of 2021 compared with the previous quarter.
The indicator for expected business activity related to project inquiries and new committed projects remained unchanged during Q1 at 69. Expectations increased slightly for project inquiries to 71 during Q1 (up one point), and decreased for new committed projects to 67 during Q1 (compared with 68 during the fourth quarter 2021).
Project Backlog Indicator reached 7.9 weeks in early Q1, which is two weeks longer than a year ago (5.6 weeks).
The latest business activity indicator related to project inquiries and new committed projects decreased to 65 during the fourth quarter of 2021 (compared to 70 during the third quarter). This decrease is a result of a significant reduction in project requests to 67 (compared to 74 in Q3) and a reduction in new committed projects to 62 in Q4 (down four points).
The backlog continues to grow in the industry, which prolongs the time before professionals can start working on a new, medium-sized project. The waiting times are the longest when comparing the beginning of any year since 2018. The backlog varies considerably depending on geography, but is longer in Q1 2022 than it was in Q1 2021 in all nine Census divisions in the USA
For the construction sector, New England has the longest lag (13.3 weeks) primarily driven by design companies in the region (18.1 weeks), while buildable builders report 8.6 weeks of waiting times. Companies in the West South Central division (which includes Texas, Oklahoma, Arkansas and Louisiana) report an 8.1-week lag before they can begin a new project, the shortest wait reported by construction companies among the nine Census divisions.
The lag also varies between all regional divisions among companies in architecture and design services. Companies in the East North Central Division (including Wisconsin, Michigan, Illinois, Indiana and Ohio) reported 10 weeks of lag, while the East South Central Division (including Kentucky, Tennessee, Alabama and Mississippi) showed much shorter lag of 4.7 weeks. Backlogs reported by architects (12.4 weeks) in the East North Central division are the driving force for long waiting times, while the waiting times to start a new project with an interior designer in that area are only 6.1 weeks. Compared with the same quarter a year ago, the backlog is longer across all nine Census divisions.
Houzz Renovation Barometer tracks market expectations for residential renovation, project backlogs and recent activity among U.S. companies in the construction and architectural and design services.