Q3 2015
HOUZZ RENOVATION BAROMETER
October 2015
@Houzz
© 2015 Houzz Inc.
Big Ideas
•  Consistent with past Barometer findings, renovation-focused firms report widespread moderate-to-severe
shortages of specialized trades and general labor, with carpenters being in the shortest supply. Labor
shortages in the Northeast are reported to be less severe than in other regions.
•  Additionally, one in ten remodelers and design-build firms and twice as many architects and designers
point to moderate-to-severe shortages of general contractors. One in four architects points to shortages of
architects. One in five firms in the outdoor sector report shortages of landscape contractors.
•  Consistent with results for the first six months of 2015, the Houzz Renovation Barometer posted high Q3
readings across all industry groups (65-73 out of 100), reflecting widespread industry confidence in market
improvement. These scores are lower compared to Q2 scores, likely to due to the start of a seasonal
slowdown, as well as, the backlog of projects from the spring months, among other factors.
•  All industry groups are continuing to report widespread year-over-year improvements in the home
renovation market in Q3 2015 (74-80 out of 100). Barometer reading exceeded 70 points for all three
quarters of 2015, pointing to strong confidence in renovation market improvements in 2015 relative to 2014.
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
Contents
Current Labor Shortages in the Renovation Sector
4-6
Q3 Houzz Renovation Barometer: Quarter-Over-Quarter
7-10
Q3 Houzz Renovation Barometer: Year-Over-Year
11-14
Methodology
15-16
Appendix: Q2 Findings - Are We Back to Normal?
17-21
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
LABOR CONDITIONS
U.S. Houzz Barometer Highlights | October 2015
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© 2015 Houzz Inc.
Shortage of Building/Renovation Trades & General Labor
Consistent with past Barometer findings, GCs, remodelers and design-build firms that specialize in home renovations report
moderate-to-severe labor shortages across a wide range of specialized trades. Carpenters are reported to be in the
shortest supply across the U.S. (cited by 45% of firms), followed by framers (25%), tile (22%), and drywall (21%). Over a third of
firms (36%) also report moderate-to-severe shortages of general laborers. In general, trade/labor shortages appear to be
most prevalent in the Midwest and least prevalent in the Northeast.
MODERATE-TO-SEVERE TRADES/LABOR SHORTAGES REPORTED BY GCS, REMODELERS, DESIGN-BUILD*
Nationally
Northeast Midwest
Carpenter (finish)
45%
Laborer (general)
36%
Framer
25%
22%
Tile
Drywall
21%
South
West
Carpenter (finish)
43%
54%
39%
46%
Laborer (general)
25%
43%
36%
37%
Framer
15%
33%
23%
29%
Tile
18%
22%
18%
28%
Drywall
15%
22%
18%
25%
Concrete
19%
Concrete
10%
22%
23%
19%
Plumber
19%
Plumber
15%
19%
18%
22%
Masonry
19%
Masonry
14%
17%
22%
19%
Electrician
19%
Electrician
12%
21%
16%
25%
Painter
18%
Painter
11%
20%
19%
21%
Cabinetry
18%
Cabinetry
11%
22%
17%
20%
Flooring
11%
Flooring
9%
14%
8%
13%
HVAC
10%
HVAC
11%
8%
10%
12%
Roofer
10%
Roofer
8%
11%
8%
14%
Siding
10%
Siding
8%
14%
9%
10%
Other
5%
8%
5%
7%
Other
6%
*Percentages reflect proportion of GCs, remodelers and design-build firms who reported moderate-to-severe shortages of specialized trades and general laborers.
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
Some Shortages of Contractors and Architects
In addition to shortages in trades and general labor, one in ten GCs, remodelers and design-build firms and twice as many
architects and interior designers report moderate-to-severe shortages of general contractors. One in four architects also
points to their own profession as being in short supply. Finally, firms in the outdoor sector report moderate-to-severe
shortages of landscape contractors (18%), architects (11%) and designers (8%).
OTHER MODERATE-TO-SEVERE PROFESSIONAL SHORTAGES REPORTED BY SPECIFIED INDUSTRY GROUPS*
24%
24%
Moderate-to-Severe Shortages
Reported by Outdoor Sector
21%
11%
7%
6%
General contractor
Architect
6%
8%
7%
18%
Landscape Contractor
11%
Landscape Architect
8%
Landscape Designer
Interior designer
Reported by GCs, remodelers and design-build firms
Reported by architects
Reported by designers
*Percentages reflect proportion of firms in specified industry groups who reported moderate-to-severe shortages of each professional category.
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
HOUZZ RENOVATION BAROMETER
QUARTER-OVER-QUARTER
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
Continued Optimism Despite Seasonal Effects
The Houzz Renovation Barometer, which tracks industry optimism in quarter-over-quarter market improvements, posted
readings of 65-73 in the third quarter of 2015 (July-Sept.), reflecting continued high levels of confidence among industry
professionals. Despite these high scores, the Barometer readings are 6%-11% lower in Q3 vs. Q2 across all industry groups,
with the exception of firms in the outdoor sectors that report a decrease of 21%, likely due to stronger seasonal patterns.
HOUZZ RENOVATION BAROMETER (QUARTER OVER QUARTER)*
Architects
Designers
GCs & Remodelers
Design-Build
Specialty:
Specialty:
Building/Renovation
Landscape/Outdoor
82
78
73
64
69
75
73
72 73
70
67
65
77
72
66
69
67
78
78
77
70
68
68
71
73
66
65
61
60
55
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
Q4E reflects expectations for the upcoming quarter.
*A reading over 50 indicates that more firms are reporting business activity is higher than those reporting it is lower in a given quarter relative to the
prior quarter. The greater the index value relative to 50, the greater the proportion of firms reporting increases in quarterly business activity than those
reporting decreases. Business activity is measured as number of inquiries, number of new projects/orders, and size of new projects/orders.
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
Widespread Influx of New Business
Significantly more firms are reporting quarter-over-quarter increases than decreases in the number of inquiries, and the
number and size of new projects in the third quarter of 2015, as reflected in Barometer readings of 63-74, 66-74, and 60-69,
respectively. These scores are lower in Q3 relative to Q2 across all three indicators of new business activity, likely to due to
the start of a seasonal slowdown, as well as, the backlog of projects from the spring months, among other factors.
COMPONENTS OF HOUZZ RENOVATION BAROMETER (QUARTER OVER QUARTER)*
Architects
Designers
GCs & Remodelers Design-Build
Specialty:
Specialty:
Building/Renovation Landscape/Outdoor
NO. OF INQUIRIES
78
74
65
NO. OF NEW
PROJECTS/ORDERS
76
66
72
67 61
67 62
69
69
76
75 76
SIZE OF NEW
PROJECTS/ORDERS
60 66 64 60
57
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
72
67 67
71
69
68
66
75
79 79
68
75
74
80
82
74
74
65
70
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
64
70 73 69
68
70
77
69
65
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
78
68
70 73
81
80
69 70
67
71 72
72
79
69 72
76
68 67
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
66 68
73
74
74
69
80
67
63 53
57
80
68
65
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
84
84
66 53
61
65
73
79
66
58
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
*See footnote on p. 8 for interpretation of the scores. The Houzz Renovation Barometer is a simple average of the scores of the three components.
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
Greatest Seasonal Effects on Northern Outdoor Firms
While outdoor specialty firms are feeling the seasonal slowdown earlier than other industry groups, Northeastern and
Midwestern outdoor firms are hit the hardest, as reflected by the 36% and 30% quarter-over-quarter decreases in Barometer
scores for the third quarter, respectively (vs. 21% and 10% decreases in the South and the West, respectively). Across all
regions, industry optimism is on average higher among GCs, design-build and building/renovation specialty firms.
REGIONAL HOUZZ RENOVATION BAROMETER (QUARTER OVER QUARTER)*
Architects
Designers
GCs & Remodelers
Design-Build
Specialty:
Specialty:
Building/Renovation
Landscape/Outdoor
NORTHEAST
63
69 69
64 63
75
69 73 69 68
57
70
77
69
60
69
77 77 72
69
78
63 63
69 66
59
68
91
58 48
MIDWEST
63
74
69 65
53
65
70 71 66 69
82
64
75
70 67
69
79 78
88
74 72
70
67 67
69
65 69
68 71
58
59
73
62 42
SOUTH
63
71 68
64 58
78
76
70 72
69
75 78 73
69
67
76
70 74
66 71
70
77 77 75
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
68
75 79
79 75
71
79 82
WEST
65
76 72
65 62
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
65 63
62
84
70
78 75
72 76
69
72 72 77 73
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
65
65
77
69
57
Q4 Q1 Q2 Q3 Q4E
‘14 ‘15 ‘15 ‘15 ‘15
*Click on the links to see the Houzz Renovation Barometer by state and by major metro area. See footnote on p. 8 for interpretation of the scores.
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
HOUZZ RENOVATION BAROMETER
YEAR-OVER-YEAR
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
Continued Year-Over-Year Gains
The Barometer posted high year-over-year readings of 74-79 in the third quarter of 2015, a notch lower than last quarter’s
readings of 75-83. Persistent year-over-year Barometer readings in excess of 70 points over the past three quarters are a
strong indication of industry confidence in renovation market improvements in 2015 relative to 2014.
HOUZZ RENOVATION BAROMETER (YEAR-OVER-YEAR)*
Architects
Designers
GCs & Remodelers
Design-Build
Specialty:
Specialty:
Building/Renovation
Landscape/Outdoor
83
80
74
76 76
75
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
76
74
75
78
80
79 79
79
80
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
77
74
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
80
76
77
79
77
79
77
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
*A reading over 50 indicates that more firms are reporting business activity is higher than those reporting it is lower in a given quarter relative to the same
quarter of the prior year. The greater the index value relative to 50, the greater the proportion of firms reporting increases in quarterly business activity
than those reporting decreases. Business activity is measured as number of inquiries, number of new projects/orders, and size of new projects/orders.
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
Strong Year-Over-Year Gains in All Business Metrics
The aggregate scores of the year-over-year Barometer are bolstered by a strong showing of all three new business
activity metrics. Across all sectors, firms are reporting widespread increases in inquiries and the number and size of new
projects in Q3 2015 relative to the same period last year.
COMPONENTS OF HOUZZ RENOVATION BAROMETER (YEAR-OVER-YEAR)*
Architects
Designers
GCs & Remodelers Design-Build
Specialty:
Specialty:
Building/Renovation Landscape/Outdoor
NO. OF INQUIRIES
NO. OF NEW
PROJECTS/ORDERS
SIZE OF NEW
PROJECTS/ORDERS
81 82 81
81 82 81 80
81 78 81 78
80 80
82
78
82 79
77 80
82
78 81 79
81 79
77 75
78 76 77 77
77
74 75 75
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
81 78 78
76
77 76 77 75
77
78 79 78 78
77 76 76 76
77 76
75
76
70 68 70 69
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
70
74 71
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
71
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
79
72
86
86
81
80
78 76
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
*See footnote on p. 12 for interpretation of the scores. The Houzz Renovation Barometer is a simple average of the scores of the three components.
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
Midwestern Building Sector Showing Weaker Confidence
Industry confidence in year-over-year market gains across regions is mostly in line with the national levels. Midwestern
GCs, design-builds, and building specialty firms report a somewhat lower optimism relative to other regions, evidenced by
Barometer readings of 73-75 (vs. 75-77 in the Northeast, 78-79 in the South, and 79-82 in the West). Other industry groups
in the Midwest report confidence more in line with other regions.
REGIONAL HOUZZ RENOVATION BAROMETER (YEAR-OVER-YEAR)*
Architects
Designers
GCs & Remodelers
Design-Build
Specialty:
Specialty:
Building/Renovation
Landscape/Outdoor
NORTHEAST
72
MIDWEST
69
79 75
84 80
73 74
77
72 73 74
77 77 78
77
76
77 79 80 73
80 76 81 78
72 75
71
72
71
67 71
79
76 77
85 81
75
SOUTH
76 75
69 71
74 74 78 72
WEST
78 80 80 77
78 76 77 75
79 79 80 82
81 78 82 81
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
80 79
76 72 79 75
78 78
73
86
80
73 73
76
68
73
83
80 79 82 79
84 81 82
83
83 81
76 78 79
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
79
75
83 83
Q4 Q1 Q2 Q3
‘14 ‘15 ‘15 ‘15
*Click on the links to see the Houzz Renovation Barometer by state and by major metro area. See footnote on p. 12 for interpretation of the scores.
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
METHODOLOGY
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
Methodology
The Houzz Renovation Barometer tracks quarterly fluctuations in business activity related to renovation of
owner-occupied existing homes. The study is conducted quarterly and presents an analysis of responses to an
online survey sent out to a national U.S. panel of architects, interior designers, general contractors/remodelers,
design-build firms, and building/renovation and landscape/outdoor specialties.1 The Houzz Renovation
Barometer survey for the current quarter was fielded September 27-October 12, 2015. N = 2688 (351 architects;
614 interior and building designers; 539 general contractors/remodelers; 355 design-build firms; 550 building/
renovation specialties; and 279 landscape/outdoor specialties).
Index Construction Method: The Houzz Renovation Barometer survey asks professionals to indicate whether
certain business activities increased, decreased, or stayed about the same in a given quarter; changes in activity
are measured quarter-over-quarter and year-over-year. “Business activity” refers to number of inquiries, number
of new projects/orders, and average size of new projects/orders. The final Houzz Renovation Barometer is
constructed as a diffusion index that 1) sums up the proportion of firms reporting increases in a given business
activity and one-half of the proportion of firms reporting no change in the activity; and 2) averages the sums
across the three components, with equal weights assigned to each component. Diffusion indices are a widely
accepted method for tracking turning points in the market. For more information on the methodology, see
U.S. Houzz Barometer Study, February 2015.
1 Building/renovation
specialties include replacement contractors (e.g., carpenters) and product installers/manufacturers/resellers (e.g., cabinetry).
Landscape/outdoor specialties include landscape architects, designers, and contractors; outdoor replacement trades (pavers), and outdoor product
installers/manufacturers/resellers (e.g., pools and spas).
U.S. Houzz Renovation Barometer | October 2015
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© 2015 Houzz Inc.
APPENDIX: ARE WE BACK TO NORMAL?
FINDING FROM Q2 RENOVATION BAROMETER
U.S. Houzz Renovation Barometer | Originally reported in July 2015
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© 2015 Houzz Inc.
Revenues & Profits Back to ‘Normal’ for Most
Over two-thirds of firms are reporting that gross revenues and profits so far this year are at or above levels they considered
to be normal before the recent recession. Furthermore, a fifth to a quarter of firms are reporting that revenues and profits are
significantly above the normal levels, while a quarter to a third are reporting that they are somewhat above normal. This
sentiment is relatively consistent across all industry sectors, although there is significant regional variation (see Appendix).
FIRMS (%) REPORTING GROSS REVENUES AND PROFITS BELOW, AT, OR ABOVE PRE-RECESSION ‘NORMAL’
Gross Revenues
Architect
12%
18%
18%
Designer
12%
17%
16%
GC & Remodeler 10% 16%
Design-Build 7% 16%
Specialty: Building/
Renovation
12% 16%
Specialty: Landscaping/
10% 14%
Outdoor
20%
21%
17%
17%
Significantly
below U.S. Houzz Renovation Barometer | Originally reported in July 2015
Profit (Net Income)
27%
28%
34%
33%
Architect
11%
21%
26%
Designer
11%
19%
21%
GC & Remodeler 9% 17%
32%
35%
25%
24% Design-Build 6% 16%
Specialty: Building/
21%
Renovation
Specialty: Landscaping/
26%
Outdoor
Somewhat
below About
same 18
12% 16%
8% 17%
16%
13%
19%
20%
17%
17%
Somewhat
above 32%
33%
36%
36%
35%
32%
20%
24%
19%
21%
20%
25%
Significantly
above © 2015 Houzz Inc.
Stronger Market for Larger Architects & Designers
A large majority of firms irrespective of firm size are reporting that year-to-date revenues and profits are at or above prerecession normal. Yet, year-to-date revenues of larger architecture and design firms (5+ employees) are much more likely
to be significantly above normal than those of very small firms (2x and 1.5x, respectively).
FIRMS (%) REPORTING GROSS REVENUES AND PROFITS BELOW, AT, OR ABOVE PRE-RECESSION ‘NORMAL’
Designers
Architects
Gross Revenues
16%
28%
13%
31%
25%
16%
24%
Gross Revenues
22%
24%
32%
27%
24%
Profits
30%
31%
14%
19%
18%
12%
None
1-4
17%
19%
20%
17%
16%
4%
5+
None
Number of Employees
Significantly
below 17%
7%
19%
24%
10%
7%
1-4
5+
Somewhat
below U.S. Houzz Renovation Barometer | Originally reported in July 2015
27%
37%
18%
17%
About
same 19
27%
28%
15%
18%
16%
11%
None
1-4
37%
Profits
20%
31%
27%
13%
15%
8%
13%
20%
16%
5+
None
Number of Employees
Somewhat
above 27%
31%
31%
37%
13%
20%
13%
9%
12%
8%
1-4
5+
Significantly
above © 2015 Houzz Inc.
Size Less of a Driver for GCs & Design-Build Firms
In the GC and design-build sectors, larger firms are somewhat more likely to have reached pre-recession performance
levels than very small firms. Yet, roughly a fifth of firms regardless of size are reporting revenues and profits significantly
above pre-recession levels.
FIRMS (%) REPORTING GROSS REVENUES AND PROFITS BELOW, AT, OR ABOVE PRE-RECESSION ‘NORMAL’
GC & Remodelers
Gross Revenues
19%
24%
23%
33%
24%
17%
13%
19%
20%
32%
38%
Profits
16%
34%
18%
19%
Design-Build
21%
33%
15%
36%
Gross Revenues
20%
18%
21%
9%
7%
13%
7%
10+
None 1-4
Number of Employees
5-9
10+
14%
25%
19%
13%
6%
None
1-4
5-9
14%
6%
Significantly
below 20%
11%
36%
41%
19%
21%
17%
19%
19%
Somewhat
below U.S. Houzz Renovation Barometer | Originally reported in July 2015
About
same 20
25%
25%
30%
32%
22%
17%
14%
17%
10%
11%
None
1-4
23%
15%
4%
Profits
19%
35%
35%
21%
15%
16%
16%
9%
10%
5+
None
Number of Employees
Somewhat
above 24%
1-4
18%
38%
24%
16%
3%
5+
Significantly
above © 2015 Houzz Inc.
Better Conditions for Smaller Outdoor Firms
Over a third of very small firms in the landscape/outdoor specialty sector are reporting year-to-date revenues and profits
significantly exceeding pre-recession levels (44% and 37%, respectively). In contrast, only 20% and 23% of larger firms (5+
employees) in this sector are reporting peak revenue and profit conditions, respectively. The performance of the building/
renovation specialty sector is somewhat more conservative relative to pre-recession levels and more evenly distributed.
FIRMS (%) REPORTING GROSS REVENUES AND PROFITS BELOW, AT, OR ABOVE PRE-RECESSION ‘NORMAL’
Specialty: Building/Renovation
Gross Revenues
15%
19%
25%
26%
Specialty: Landscape/Outdoor
Profits
15%
18%
17%
Gross Revenues
22%
26%
32%
35%
33%
19%
19%
16%
16%
15%
15%
14%
12%
None
1-4
34%
38%
37%
38%
12%
23%
18%
11%
16%
17%
17%
19%
16%
13%
11%
6%
5-9
10+
None 1-4
Number of Employees
5-9
10+
15%
13%
16%
7%
Significantly
below Somewhat
below U.S. Houzz Renovation Barometer | Originally reported in July 2015
19%
11%
About
same 21
23%
30%
26%
39%
16%
16%
20%
44%
34%
Profits
50%
19%
23%
16%
17%
15%
9%
16%
10%
5%
None
1-4
17%
26%
18%
11%
12%
5%
1-4
5+
16%
7%
5+
None
Number of Employees
Somewhat
above 42%
Significantly
above © 2015 Houzz Inc.