2022 Industry Review Offers Insights for 2023

As we wave goodbye to 2022 and get ready to toast the new year, it’s a great time to reflect and to plan anew. And to help remodelers, interior designers, and other professionals do just that for their businesses, we’ve compiled some of the key data points and takeaways from our research throughout the year. We’ll look at the industry and housing market as a whole, what homeowners have been doing (and not doing), and what surveyed pros say contributes most to their revenues. Let’s dive in.

Housing Market Favors Renovation Activity

A number of 2022’s circumstances spell good news for remodeling service providers, both in building and design. First, U.S. homeowners had accumulated a whopping $16 trillion in home equity by Q2 2022, per a CoreLogic report. Compare that with $9 trillion in equity in Q2 2019. And 50% of renovating homeowners report having 100% equity share in their home, according to the 2022 U.S. Houzz and Home Study.

Takeaway: Homeowners have much more equity to tap into now for financing remodeling projects, and full equity isn’t even a requirement for half of homeowners to start renovating.

Second, interest rates spiked this year. The weekly average for a 30-year fixed-rate mortgage on December 8, 2022, was 6.33%, compared with 3.10% for the same week in 2021, according to Freddie Mac. Those high interest rates mean buying a home is out of reach for many Americans, and less attractive even for those who can afford it. They can cause new home construction to slow down as well.

Add to that the shortage of newly built homes and the fact that the median age of existing homes is 42, according to the U.S. Census Bureau’s 2021 American Housing Survey, and the picture is even more positive for those in the renovation industry. (In fact, 46% of homes renovated in 2022 were built before 1981, meaning they were at least 40 years old, per the Houzz and Home Study.) Plus, 57% of homeowners renovating their homes have no intention of moving out after 20 years or ever, according to the 2022 Houzz U.S. Homeowners’ Activity Study; they plan to just make their homes more accommodating for aging in place.

Takeaway: Homeowners are more likely to stay put — and therefore to renovate — than to move out and buy new.

Projects and Hiring Are Going Strong

Undeterred by market volatility, only 11% of homeowners are holding off on their remodeling projects, and only 1% have canceled them altogether, according to our activity study. The same study found that 23% of homeowners plan to start projects in 2023 or even sooner — more than half plan to start within the next three months.

High prices at everything from the gas pump to the grocery store aren’t causing mass defections to the DIY route, either. The overwhelming majority (91%) of those with renovation projects on the 2023 calendar plan to hire at least one professional, according to the study. General contractors are in the highest demand, sought by 40% of renovating homeowners.

Takeaway: Renovating pros are likely to be in high demand.

Top Hiring Considerations: Price and Recommendations 

While they’re still paying for design and building help, homeowners are cost-conscious; 53% of the respondents in our activity study who completed a renovation project cited price as the most important consideration when they’re looking to hire. But almost the same number, 52%, said recommendations from friends and family are key in their decision-making.

And the majority of respondents (58%) for the 2022 Houzz and Home Study say these recommendations are one of their top resources when they’re looking to hire. A smaller share (40%) said they look for someone who can complete the project within their desired timeline, while other resources turned to the most are websites and social media (38%) and service providers already worked with (28%).

What are the least important considerations in hiring decisions? The majority of homeowners (57%) say online consultations. Almost half (45%) cite evening or weekend consultations, and 39% say awards and accolades are one of the least important factors. 

Takeaways: Building an online presence with great client reviews is essential. Maximizing efficiency to keep costs as low as possible without sacrificing profits is also key.

Top Revenue Sources: Referrals and Repeat Clients

It’s no secret that having clients spread the word and hire you again is important for your business. But it might come as a surprise just how important. According to the 2022 U.S. Houzz State of the Industry Study, here’s the breakdown of professionals who say client referrals constitute a meaningful position of their revenue:

• Construction pros: 90%
• Architects and designers: 88%
• Speciality service providers (electricians, plumbers, and so on): 87%

Here’s the same breakdown for the importance of getting repeat clients:

• Speciality service providers (electricians, plumbers, and so on): 78%
• Architects and designers: 75%
• Construction pros: 73%

And here it is for getting professional referrals:

• Architects and designers: 64%
• Speciality service providers (electricians, plumbers, and so on): 63%
• Construction pros: 59%

Takeaways: Providing great service is a given. But it’s also essential to get clients and other pros to talk up your business, including asking them for reviews.

Top Desired Improvement: Schedule Tracking

To make sure you’re leveraging all your hard work in the areas where it matters most, we asked homeowners what could have improved their experience of working with a pro. According to one of our surveys of more than 6,000 U.S. homeowners on Houzz, schedule tracking is the No. 1 priority. Clear communication came in second, followed by cost transparency, visualization of the end result, and online payment options.

Speaking of payments, the share of homeowners turning to credit cards for project payments increased by 6 percentage points between 2021 and 2022, per the Houzz and Home Study, and now stands at 35%. After cash, it’s the most popular payment method for both large- and small-budget projects.

Takeaways: Use software that makes schedule tracking and communication easy. Houzz Pro does exactly that as well as offers features for sharing budgets with clients and presenting 3D walk-throughs of designs. And get set up with a credit card payment processor.

While you might already have had hunches about some or all of the above points, now you have hard data to back those hunches up. We hope this review and all the takeaways set you up for a banner year of business in 2023!