Companies across the remodeling and design industries have a confident outlook for 2022. More than two-thirds anticipate that this will be a good or very good year and that demand for their services will continue to increase, according to the latest research from Houzz.
Read on for more details from the 2022 U.S. Houzz State of the Industry report, which summarizes the responses of more than 2,800 home renovation and design professionals.
“Following a busy year for the home renovation and design industry, the findings from the Houzz State of the Industry show that professionals are bullish that momentum will continue through 2022, ”Houzz senior economist Marine Sargsyan says. “The positive outlook is prevalent across industry groups from architects and designers to builders and landscapers, despite headwinds in the form of labor and product availability and price volatility. Accumulated home equity and other industry fundamentals continue to drive demand for improvements to aging housing stock, and for upgrades that will enable homeowners to stay in their homes long into retirement years.”
To put together the State of the Industry report, Houzz surveyed firms in seven categories. The first four are architects, interior designers, building companies (including general contractors, remodelers and builders) and design-build firms.
The next three categories are different types of specialty firms. Building and renovation specialty firms include pros such as carpenters and cabinet installers. Landscaping and outdoor specialty firms include pros such as landscape architects and pavers. Decorating specialty firms include pros such as decorators and providers of window coverings.
The 2022 U.S. Houzz State of the Industry study includes responses from 2,805 firms on Houzz that offer services related primarily to residential renovation or design. The survey was fielded from Dec. 30, 2021, to Jan. 26, 2022.
More Than Two-Thirds of Firms Report a Positive Business Outlook for 2022
The majority of residential remodeling and design firms — 71% to 77% of each industry group — report that they expect 2022 to be a good or very good year overall for their businesses.
For the first time since 2018, architects have the most positive outlook, with nearly 4 in 5 (77%) expecting a good or very good year. General contractors and design-build companies have the most optimistic outlook among residential construction firms, with 73% of each expecting a good or very good year, while 71% of specialty building and renovation firms expect the same.
Firms Expect Tempered Revenue Growth Compared With Last Year
Following the highest year-over-year revenue growth in the previous four years, businesses across all seven industry groups anticipate continued growth in 2022 (5.3% to 9%), but at a lower rate than in 2021 (7.3% to 12.9%).
Architects have the most conservative growth estimates (5.3%), while construction businesses (general contractors, design-build firms and building and renovation specialists) anticipate growth in the high single digits for 2022.
Firms Still Expect Revenues and Profits to Increase in 2022
Despite expecting slower growth compared with last year, all seven industry groups expect revenues and profits to increase rather than decrease in 2022. Among those groups, 60% to 71% of firms expect revenue growth, while 51% to 64% expect profit growth.
Across the seven industry groups, interior designers have the highest share expecting profit growth (64%) and the lowest share predicting a decline (12%). Among construction businesses, slightly more building and renovation specialists (59%) expect profit growth than do general contractors (57%) and design-build firms (58%).
Confidence in Demand for Services Remains
While their optimism is more tempered than in 2021, more companies across all seven industry groups (41% to 54%) believe that demand for their services will increase in 2022, rather than decrease (6% to 11%).
Less Positive About the National Economy in 2022
For the first time since Houzz began tracking expectations among residential remodeling and design businesses, expectations that the national economy will decline (held by 37% to 48% of companies) have surpassed expectations that it will improve (8% to 21%).
Firms Expect Labor Shortages to Persist
More companies across all industry groups expect labor availability to worsen this year than expected it in 2021 (41% to 55% in 2022 versus 34% to 45% in 2021). As shortages affect the cost of labor, more companies (49% to 64%) also expect labor costs to increase in 2022 compared with those who expected it a year ago (42% to 52%).
The worsening labor outlook is especially pronounced among construction businesses. The percentages of general contractors, building and renovation specialists, and design-build firms that expect labor availability to worsen in 2022 have increased by 11, 11 and 10 points, respectively, compared with expectations a year ago.
Companies Expect High Material Costs and Low Availability
More than half of companies across the seven industry groups expect product and material costs to rise in the coming year, and the percentages are higher than in 2021. For 2022, 53% to 72% of firms are predicting these cost increases; in 2021, 57% to 69% expected them.
Expectations for product and material availability this year vary by industry. Five groups predict that availability will worsen (46% to 53%), while a large share of architects (40%) and building and renovation specialists (51%) are forecasting an improvement. Among the two latter groups, 38% and 46% of businesses, respectively, expect availability to worsen.
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