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Houzz Inc., the leading platform for home remodeling and design, including project management software for industry professionals, today released the Q4 2023 Houzz U.S. Renovation Barometer. The Barometer tracks residential renovation market expectations, project backlogs and recent activity among businesses in the U.S. construction sector and the architectural and design services sector. Fielded from September 30 through October 12, 2023, the Barometer provides timely insights into the impact of recent economic volatility on the home improvement market. Findings diverge among the construction and architectural and design services sectors with the latter reporting increased business activity in the past quarter and optimism through the end of the year. By contrast, more professionals in the construction sector report declines in Q3 business activity than improvements, leading to a somewhat unfavorable outlook for Q4.

“Following improved Q3 business activity, architecture and design professionals are relatively optimistic about business through the end of the year,” said Marine Sargsyan, Houzz staff economist. “However, as business activity continues to slow in the construction sector, build-only professionals in particular have a more negative perspective about the quarter. Despite this outlook, activity continues and backlogs remain at least one week longer than they were last year for the construction sector.”

Backlogs across the construction sector are at 11.4 weeks, up 0.9 weeks compared to the same period last year (10.5 weeks). High wait times of 15.1 weeks are reported by construction professionals in the West North Central region. By contrast, businesses in the architectural and design services sector report significantly shorter wait times (6.1 weeks), a decrease from last year (7.6 weeks).

Q4 2023 Construction Sector Barometer
The overall outlook among firms for the construction sector is unfavorable; however, expectations diverge among design-build firms and build-only remodelers. Design-build firms are more optimistic with an expected business indicator of 53 points, meaning that slightly more businesses anticipate growth than decline. Build-only remodelers anticipate slower activity than the previous quarter (41 in Q4 compared with 54 in Q3).
- The Expected Business Activity Indicator related to project inquiries and new committed projects declined to 47 for Q4 (compared with 54 in Q3), which indicates that more businesses expect quarter-over-quarter declines than quarter-over-quarter increases. Expectations for project inquiries decreased to 46, compared with 54 in Q3, and new committed projects are at 47, down 6 points relative to Q3 expectations (53).
- The Project Backlog Indicator is 11.4 weeks in the beginning of Q4, which is 0.9 weeks longer than a year ago and 5.1 weeks longer than five years ago in Q4 2018.
- The Recent Business Activity Indicator related to project inquiries and new committed projects is at 44 in Q3, up 1 point from Q2. This is driven by a 4-point increase in project inquiries in Q3, relative to the previous quarter and a 3-point decrease in new committed projects to 44 in Q3.

Q4 2023 Architectural and Design Services Sector Barometer
The positive sentiment among the architectural and design services sector is significantly stronger for Q4 (at 61) than the previous quarter (52). More firms expect business activity to improve than those that expect slowdowns. Both interior designers and architects report improved Q3 business activity, though interior designers (64) are somewhat more optimistic than architects (59) that business growth will continue.
- The Expected Business Activity Indicator related to project inquiries and new committed projects increased to 61 for Q4 (up 9 points from Q3). The increase in the overall indicator is primarily driven by a 9-point increase in expectations for both project inquiries and new committed projects to 61, each in Q4.
- The Project Backlog Indicator is 6.1 weeks in the beginning of Q4. Backlogs are down one-and-a-half weeks compared to last year (7.6 weeks), but a week longer than they were five years ago in Q4 2018 (5.1 weeks).
- The Recent Business Activity Indicator related to project inquiries and new committed projects increased significantly to 52 in Q3 (compared with 43 in Q2), with interior designers at 55 versus architects at 51, indicating that more businesses experienced improvements in business activity than those who reported slowdowns for both groups. Following a continuous decline over eight consecutive quarters, the overall indicator is up the second quarter in a row to 52 in Q3. Recent project inquiries increased significantly to 50 and new committed projects increased to 55 in Q3 (up 10 and 9 points, respectively, compared with Q2).

Regional Backlogs
For the construction sector, the West North Central division (including Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota) has the longest backlog (15.1 weeks) driven by wait times reported by build-only and design-build firms in the region (18.3 and 12 weeks, respectively). Businesses in the East South Central division (including Alabama, Kentucky, Mississippi and Tennessee) report backlogs of 5 weeks before they can begin a new project, the shortest wait time reported by construction firms among the nine Census divisions. Compared with the same quarter one year ago, backlogs for the construction sector are longer across five of nine Census divisions (across all but the East North Central, East South Central, Middle Atlantic and the West South Central divisions).

Backlogs also vary across all regional divisions among businesses in the architectural and design services sector. Businesses in the Middle Atlantic division (New York, New Jersey and Pennsylvania) reported backlogs of 8.3 weeks, while the West South Central division (including Arkansas, Louisiana, Oklahoma and Texas) showed much shorter backlogs at 4.4 weeks. Backlogs reported by architects in the Middle Atlantic division (10.2 weeks) are the driving force for long wait times, whereas the wait to begin a new project with an interior designer in that area is only 5.1 weeks. Compared with the same quarter one year ago, backlogs for the architectural and design services sector are longer across only two of the nine Census divisions (Middle Atlantic and South Atlantic divisions).

Notes to Editors
The Houzz Renovation Barometer is based on a quarterly online survey sent to a national panel of businesses with an online profile on Houzz. The Barometer keeps a pulse on home renovation market conditions via three distinct indices that track expected, current and recent business activity in two related industry sectors: the construction sector and the architectural and design services sector.

The Expected Business Activity Indicator is based on survey questions that ask businesses to report whether they expect the number of project inquiries and new committed projects to increase, decrease or stay unchanged in the upcoming quarter relative to the prior quarter. Scores for each component are then computed as a seasonally adjusted diffusion indices on a scale of 0 to 100, with index values over 50 indicating that a greater proportion of firms reported quarter-over-quarter increases than those reporting decreases.

The Recent Business Activity Indicator is based on survey questions that ask businesses to report whether they observed the actual number of project inquiries and new committed projects increasing, decreasing or staying unchanged in the most recent quarter relative to the prior quarter. Scores for each component are then computed as a seasonally adjusted diffusion indices similar to the Expected Business Activity Indicator. Recent Business Activity Indicator scores can be compared with the Expected Business Activity Indicator scores for any given quarter to see whether actual activity met, exceeded or fell short of expectations.

Finally, the Backlog Indicator is based on survey questions that ask businesses to report wait times in weeks before a company can start work on a new midsize project. Scores are computed as average wait times without a seasonal adjustment.

All three indices are computed individually for two subsectors in the construction sector (build-only remodelers and design-and-build remodelers) and for two subsectors in the architectural and design services sector (architects and interior designers), as well as for nine regions that follow U.S. Census Bureau Divisions. The aggregated national indices are computed using industry subsector weights and regional weights derived from the 2016 U.S. Census County Business Patterns survey. Detailed methodology and underlying quarterly indices for the construction sector and the architectural and design services sector, and other information on market conditions, can be found on houzz.com/research.

The Q4 2023 Barometer was fielded September 30 through October 12, 2023, and garnered responses from more than 1,000 home improvement firms on Houzz. n=1,060.


About Houzz
Houzz is the leading platform for home remodeling and design, providing an all-in-one software solution for industry professionals and tools for homeowners to update their homes from start to finish. Using Houzz, people can find ideas and inspiration, hire professionals, and shop for products. Houzz Pro (houzz.com/pro) provides home industry professionals with a business management and marketing SaaS solution that helps them to win projects, collaborate with clients and teams, and run their business efficiently and profitably. The Houzz community is made up of millions of homeowners, home design enthusiasts and home improvement professionals around the world. Houzz is available on the web and as a top-rated mobile app. For more information, visit houzz.com. Houzz is a registered trademark of Houzz Inc. worldwide.