The Houzz Renovation Barometer for the third quarter of 2017 shows that all industry sectors, including architects, designers, general contractors/remodelers, design-build, specialty building/renovation and specialty landscape/outdoor, are confident that business will be strong for the remainder of the year.

According to Houzz, all sectors hit a reading of 62 or higher. The greater the index value relative to 50, the greater the proportion of firms reporting increases in quarterly business activity than those reporting decreases.

Despite that, labor shortages continue to overshadow the industry, as reported by 78 percent of general contractors, remodelers and design-build firms. For homeowners, that means higher costs and longer project timelines. A total of 56 percent of renovation firms saw rising costs for subcontractors in Q3 2017 (vs. 53 percent in Q3 2016), and 54 percent report longer project lengths (vs. 50 percent in Q3 2016) due to labor shortages.

“Residential renovation and design professionals report another strong quarter of new business activity and a very positive outlook in the near term,” said Nino Sitchinava, principal economist at Houzz. “That said, widespread skilled labor shortages leave little wiggle room for businesses to absorb sudden demand pressures such as recent hurricanes in the South or more localized damage from wildfires in the West, driving up wait times.”

The Houzz Renovation Barometer Backlog Index increased slightly from Q2 2017 to Q3 2017, with project backlogs of five to eight weeks on average across sectors, reflecting significant wait times before companies can begin new projects. General contractors, remodelers and design-build companies have the longest average backlogs (7.1 and 7.7 weeks, respectively).

Year-Over-Year Barometer Findings

The barometer posted year-over-year readings of 67 to 75 in the third quarter of 2017, indicating high optimism in continued year-over-year gains in the home renovation market. These scores are in line with Q2 2017 scores (65 to 78). The year-over-year scores for architects increased from 65 in Q2 to 67 in Q3 and are now at the highest level since Q2 2016.

The full Q3 2017 Houzz Renovation Barometer can be found here.

Impacts of Hurricanes

Hurricanes Harvey and Irma recently hit the Houston metropolitan area and Southwestern Florida. Because of that, Houzz took a deeper look at conditions among renovation professionals in these areas.

Within the first two weeks after the storms, the hurricanes caused 28 percent of renovation-related businesses in the Houston metropolitan area and 41 percent in Southwestern Florida to shut down temporarily. Among companies that suspended operations, 91 percent of those affected by Hurricane Harvey kept their doors closed for a week or longer. For those affected by Hurricane Irma, the figure was 65 percent.

The hurricanes also worsened labor shortages across both regions and increased project backlogs by nearly two weeks on average. Top business challenges exacerbated by the hurricane disruptions are the shortage of subcontractors (38 percent for both Irma and Harvey-stricken areas), managing cost-conscious consumers (23 and 46 percent, respectively), and managing consumer expectations (23 and 31 percent, respectively). A shortage of products and/or materials is also a top challenge (23 and 15 percent, respectively).

Renovation-related companies estimate the average total cost of repairs and renovations to homeowners to be $13,000 for the worst Irma-stricken areas, and a whopping $111,000 for the worst Harvey-stricken areas.

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