Palo Alto, CA — Houzz Inc., released the Houzz Q1 2022 Renovation Barometer, which found confidence among construction professionals is at its highest level since 2018. architecture and design increased by one point compared to the first quarter of 2021. Recent activity remains high, despite a slight decline from its peak in early 2021. Anticipated project requests are among the highest on record for the construction sector in the history of the Barometer.
“Business confidence in the residential construction and design industry has remained elevated since the initial shock of the pandemic and continues through 2022,” said Marine Sargsyan, senior economist at Houzz. “Companies are faced with product and material shortages and price volatility, lack of available labor and interest rate fluctuations, which can impact the indicator of recent business activity. That said, even with long wait times, companies are reporting no respite from pent-up demand, confirming long-standing market fundamentals.
Barometer of the construction sector Q1 2022
In the construction industry, construction-only and design-build professionals are in line with expected business performance, although sentiments differ on recent business activity for the fourth quarter of 2021. While renovators in construction only report slower activity compared to the third quarter, design-build companies saw a slight increase in activity in the fourth quarter of 2021 compared to the previous quarter.
The expected business activity indicator related to project inquiries and new projects committed rose to 79 in the first quarter (from 74 in the fourth quarter of 2021). Project request expectations increased significantly to 80 from 73 in Q4 2021, and new projects committed rose to 78 (up four points from Q4 2021).
The project delay indicator reached 11.4 weeks in the first quarter, more than a month higher compared to the same period a year ago (7.4 weeks).
The recent business activity indicator related to project inquiries and new projects committed fell significantly to 65 in the fourth quarter (from 73 in the third quarter). This was due to a drop in project requests, which fell to 66 in Q4 (down five points from Q3), and a significant drop in new projects committed to 64 (down nine points from Q3). T3). After hitting its record level of activity in Q2 2021, recent activity has steadily converged to pre-pandemic levels (65 in Q4 2019).
Barometer of the architectural and design services sector Q1 2022
Business performance expectations diverge somewhat between the architectural and design services sub-sectors. Interior designers expressed optimism for business in the first quarter, reporting higher expectations than last quarter for project requests and new projects committed. Architects tempered their outlook, anticipating a decline in project requests and new projects being committed. Both groups report slower business activity in the fourth quarter of 2021 compared to the previous quarter.
The expected business activity indicator related to project inquiries and new projects committed remained the same in the first quarter at 69. Expectations rose slightly for project inquiries to 71 in the first quarter ( up one point), and decreased for new committed projects to 67 in Q1 (from 68 in Q4 2021).
The project backlog indicator reached 7.9 weeks at the start of the first quarter, two weeks more than a year ago (5.6 weeks).
The recent business activity indicator related to project inquiries and new projects committed fell to 65 in Q4 2021 (from 70 in Q3). This decline is the result of a significant drop in project requests to 67 (vs. 74 in Q3) and a decrease in new projects committed to 62 in Q4 (down four points).
Backlogs continue to grow in the industry, lengthening the time before professionals can begin work on a new medium-sized project. In fact, wait times are the longest when comparing the start of a year since 2018. Backlogs vary widely by geography, but are longer in the first quarter of 2022 than they were in first quarter of 2021 in the nine census divisions in the United States.
For the construction sector, New England has the longest backlog (13.3 weeks) driven primarily by design-build firms in the region (18.1 weeks), while construction renovators only report wait times of 8.6 weeks. Businesses in the West South Central division (which includes Texas, Oklahoma, Arkansas and Louisiana) are reporting 8.1 weeks of backlogs before they can start a new project, the shortest wait time reported by construction companies among the nine census divisions.
Order books also vary across regional divisions among companies in the architectural and design services sector. Businesses in the East North Central division (including Wisconsin, Michigan, Illinois, Indiana and Ohio) reported 10-week backlogs, while the East South Central division (including Kentucky, Tennessee, Alabama and Mississippi) posted much shorter arrears at 4.7 weeks. Backlogs reported by architects (12.4 weeks) in the Central North East division are driving long wait times, while waiting times to start a new project with an interior designer in this region are only 6.1 weeks. Compared to the same quarter a year ago, backlogs are longer in all nine census divisions.