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Houzz Says Remodelers See Green in 2016

Wednesday, January 20, 2016

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U.S. home renovation and design companies forecast more widespread revenue and profit growth in 2016 than they experienced in 2015, a new survey suggests.

Houzz Inc., an online platform for residential remodeling and design, released its 2016 Houzz State of the Industry report Tuesday (Jan. 19).

Houzz
Andrew Snow Photography / Courtesy Houzz

Half or more of residential renovation pros surveyed expect revenue growth rates of 10 percent or more in 2016.

The report provides a recap of 2015 and an outlook for 2016 for residential renovation and design businesses based on data reported by more than 3,500 professionals in the Houzz community.

Survey participants included 438 architects, 718 interior and building designers and 531 building/ renovation specialty firms.

Growth Expected

The vast majority of residential businesses “are bullish on 2016, expecting both revenue and profit growth to continue this year,” Houzz reported.

Half or more of the businesses surveyed expect revenue growth rates of 10 percent or more (48-59 percent of businesses, depending on industry sector), with over one-fifth expecting annual rates of 15 percent or more (22-35 percent of businesses), according to the report.

architect
©iStock.com / Solish Images

The increasing cost of doing business was a top challenge cited by the survey participants.

The company noted that those findings are roughly in line with the growth experienced in 2015 by all industry groups with the exception of architects, who anticipate more conservative growth rates in 2016 relative to 2015.

Investing in Business

In order to sustain substantial growth in 2016, Houzz said half or more firms plan to further invest in marketing (50-70 percent of firms across industry groups).

Over a third plan to bring in larger budget projects (39-54 percent of firms); increase their prices (37-49 percent of firms); and/or improve customer experience (35-47 percent of firms), the report related.

‘Healthy Market’

“All of our Houzz industry research to-date points to an exceptional two-year run for the home renovation and design industry, leading to a healthy market in 2016,” said Nino Sitchinava, principal economist at Houzz.

“2016 should bring more moderate but steady growth, driven by solid consumer demand, but hampered by labor shortages.”

Houzz
Rikki Snyder / Courtesy Houzz

The Houzz State of the Industry study is conducted annually. This survey was fielded from Dec. 9, 2015, to Jan. 11, 2016.

Sitchinava said she expects businesses to increase their fees to offset rising labor costs and years of low margins, as well as focused efforts on larger projects while expanding their staff.

Challenges Cited

Despite overall industry growth in 2015 and a positive outlook for 2016, the survey cited the following challenges:

  • Managing Consumer Concerns and Expectations: Tackling the cost-related worries of consumers (31-45 percent) and finding common ground between consumer expectations and their budgets (21-39 percent) were top challenges for businesses in 2015.
  • Rising Business Costs: The increasing cost of doing business was also a top challenge across most industry groups (19-37 percent). Rising employee wages and/or benefits is one of the top drivers behind these swelling costs (36-63 percent). Other commonly cited cost drivers include advertising/marketing investment, product and material prices, business insurance fees, and subcontractor wages and fees.
  • Staffing Shortages: Consistent with other Houzz industry research, employee and/or subcontractor shortages are other top concerns for most industry groups heading into 2016 (13-37 percent). Firms were just as likely to expand their staff in 2015 as they did in 2014. In 2016, hiring is expected to continue at similar rates, with design-build and building and renovation specialty firms especially bullish.

Recap of 2015

Last year was a year of revenue growth for nearly three-quarters (67-76 percent) of residential renovation and design companies on Houzz, mirroring 2014 rates, the company reported.

Revenue growth rates were more moderate in 2015 than in 2014; however, 30-37 percent of businesses reported high double-digit revenue growth (more than 15 percent) in 2015, compared to 34-45 percent or more in 2014.

Houzz noted that similarly, while over half of firms experienced an increase in profits in 2015 relative to 2014, the proportion of companies that experienced this growth is approximately 5 percentage points lower than in 2014 across nearly all professional sectors.

Additionally, Houzz pointed to a gap of 7-14 percentage points between the proportion of firms reporting revenue growth and those reporting profit growth in 2015 for nearly all industry groups.

“Not coincidently, over half of the firms in each category reported that the cost of doing business increased in 2015, with those in the construction sector reporting the most widespread cost increases (76 percent among general contractors, 74 percent among building and renovation specialty companies, and 70 percent among design-build firms),” Houzz reported.

The Houzz State of the Industry study is conducted annually among home renovation firms on Houzz that offer services related primarily to residential renovation and/or design.

The study was fielded Dec. 9, 2015, to Jan. 11, 2016.

Renovation Barometer

Houzz also released its Q4 2015 Houzz Renovation Barometer, showing continued confidence in year-over-year and quarter-over-quarter gains in business activity among renovation industry professionals, and an optimistic outlook for the first three months of 2016.

   

Tagged categories: Architects; Decorative painting; Home builders; Interior design; Market; Renovation; Residential; Residential Construction

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