Palo Alto, California — Houzz Inc. released the Q2 2022 Houzz Renovation Barometer which found that remodeling companies dampened their positive outlook for expected business activity in Q2 2022 from last quarter’s peak, despite a strong first quarter performance. While architecture and design professionals remain optimistic about their business prospects, this has weakened slightly, with expectations for project inquiries and new project commitments falling somewhat. The backlog reached three months for construction professionals and nearly two months for architecture and design professionals.
“While business activity and confidence in demand for construction and design services has been as strong as it has been for the past four quarters, industry experts are cautious about expected second-quarter performance,” said Marine Sargsyan, business economist at Houzz. “Professionals anticipate some impact on project requests due to inflation, supply chain delays and rising costs of materials such as wood, aluminum and even gasoline. However, long backlogs remain into the second quarter, indicating continued renovation and design activity.”
Q2 2022 construction industry barometer
In the construction industry, pure build and design-build experts are unanimous on expected business development, although opinions differ on recent business activity for the first quarter of 2022. While build-only remodelers report stronger activity compared to Q4 2021, design-build companies saw a slight decline in activity in Q1 2022 compared to the previous quarter.
The indicator of expected business activity related to project requests and new project commitments decreased to 67 in the second quarter (compared to 79 in the first quarter). Expectations for project requests fell significantly to 65 compared to 80 in Q1 and new project commitments are 69 in Q2, down nine points from Q1.
The Project Backlog Indicator hit 12 weeks in the second quarter, which is the highest reported since 2017. Compared to the same period last year, the backlogs are 2.7 weeks longer.
The Recent Business Activity Indicator related to project requests and newly committed projects increased significantly to 71 in the first quarter (compared to 65 in the fourth quarter of 2021). This is due to a four-point increase in project requests in Q1 compared to the previous quarter and a significant increase in newly committed projects to 72 (64 points compared to the fourth quarter of 2021).
Q2 2022 Industry Barometer for Architecture and Design Services
Expectations for business development differ somewhat in the architecture and design services sub-sectors. Interior designers expressed optimism for business in the second quarter, reporting higher expectations than last quarter for new committed projects. Architects have softened their outlook and expect a drop in project inquiries and new projects being committed. Both groups report slower business activity in the first quarter of 2022 compared to the previous quarter.
The indicator for expected business activity related to project inquiries and newly committed projects decreased to 65 in the second quarter. This decrease is mainly due to lower expectations for project requests from 63 in Q2 (down 8 points compared to Q1), however expectations for newly committed projects increased to 68 in Q2 (compared to 67 in Q1).
The Project Backlog Indicator remains at 7.9 weeks at the start of the second quarter, which is in line with the previous quarter but slightly shorter than a year ago (8.4 weeks in the second quarter of 2021).
The Recent Business Activity Indicator related to project requests and new project commitments decreased to 63 in Q1 (compared to 65 in Q4 2021). This decrease is the result of a decrease in project requests to 62 (compared to 67 in Q4 2021) and an increase in newly committed projects to 63 in Q1 (an increase of one point compared to Q4 2021).
Backlogs across the industry continue to mount, and the time it takes professionals to start work on a new, mid-size project continues to lengthen across the country. In fact, the waiting times are the longest since 2018 compared to the beginning of the year. The arrears vary significantly by region, but are longer in the second quarter of 2022 than in the second quarter of 2021 in all nine U.S. census departments
For the construction sector, the East North Central division (which includes Michigan, Wisconsin, Illinois, Ohio and Indiana) has the longest lag (13.8 weeks), driven primarily by design-build firms in the region (19.4 weeks). , while pure remodeling companies are operating report 8.1 week wait times. Companies in the East South Central Division (which includes Kentucky, Tennessee, Mississippi and Alabama) are reporting 9.4 weeks backlog before they can start a new project, the shortest wait time reported by construction companies among the nine Census divisions . The arrears in the construction sector are similar or longer than a year ago in all nine census divisions.
Order backlogs also vary across all regional divisions of companies in the architecture and design services industry. Businesses in the Middle Atlantic division (including New York, Pennsylvania and New Jersey) reported a 9.9-week backlog, while the West North Central division (including North Dakota, South Dakota, Nebraska, Kansas, Minnesota, Iowa and Missouri) posted a lot shorter was lag at 6.2 weeks. Architect-reported backlogs (12.4 weeks) in the Mid-Atlantic area are the driving force behind long wait times, while waiting times to start a new project with an interior designer in this area are just 5.7 weeks. Compared to the same quarter a year ago, backlogs for the architecture and design services sector are shorter in five of the nine Census divisions (East South Central, Mountain, New England, South Atlantic and West North Central).