The 2018 Houzz U.S. State of the Industry report, released today, finds that companies across all sectors in the residential renovation and design industry anticipate revenue growth in 2018 following positive results in 2017.

“The residential renovation and design industry continues to build on the robust growth of the past four years,” said Nino Sitchinava, principal economist at Houzz. “Average revenue growth rates hovered around 10 percent annually, with performance exceeding expectations for most firms, and at least one-fifth of businesses hiring more workers each year. With market fundamentals aligned in favor of the home improvement industry, 2018 is set to be another great year. That said, businesses are cautious about tightening local labor markets that may hamper growth in many regions, and apparent economic uncertainty on a national level.”

The majority of companies surveyed have a positive outlook for 2018 (71 percent to 88 percent). Those in construction-focused and outdoor industry groups are particularly optimistic, with 36 to 44 percent having “a very good” outlook for the year. Companies across industry groups also anticipate demand for their services to improve (65 to 70 percent) and expect an average revenue rate of growth of seven to 12 percent in 2018

Positive growth sentiments are somewhat tempered by expectations that labor availability and costs will worsen (27 to 53 percent and 36 to 57 percent, respectively) despite already constrained labor markets over the past several years. Regardless, two in five construction-focused businesses (40 to 46 percent) and one in five design-related companies (20 to 26 percent) plan to hire in 2019.

While the availability of products and materials is expected to remain stable in 2018 according to two thirds of companies across industry groups (66 to 76 percent), half expect the costs of products and materials to rise (47 to 60 percent). Between increases in the costs of labor and costs of products and materials, it is not surprising that many companies expect the overall costs of doing business to continue to increase in 2018

Expectations on consumer demand may also be affected by polarized views of the national economy in 2018. At least a quarter of companies in each industry group expect the national economy to improve (25 to 38 percent), while a meaningful share anticipate conditions will deteriorate (12 to 28 percent). Local economies are expected to improve (31 to 41 percent) or remain unchanged (48 to 58 percent).

Looking back on 2017, the majority of firms reported positive results, with at least three in five companies showing revenue increases (61 to 73 percent). At least two in five experienced annual growth rates of 10 percent or more (44 to 60 percent) and approximately one fifth reported growth rates of 25 percent or higher (16 to 21 percent). Architects, general contractors, and design-build companies showed accelerated average annual revenue growth rates (eight, 11 and 11 percent, respectively) compared to 2016 rates (seven, nine and eight percent, respectively). Other companies reported average revenue growth rates in line with 2016 rates.

Consistent with 2016 findings, two in five companies across industry groups reported a surge in the costs of doing business in 2017 (54 to 79 percent versus 58 to 76 percent in 2016). Those in the construction sector continued to see the most widespread cost increases, specifically three in four general contractors, design-build firms, and building and renovation specialty firms (73 to 79 percent).

The Houzz U.S. State of the Industry was conducted among home renovation firms in the Houzz U.S. community that offer services related primarily to residential renovation and/or design. The report is based on data reported by nearly 3,400 professionals. Companies were grouped into seven industry sectors including architects, interior designers, general contractors and remodelers, design-build firms, building and renovation specialty firms, landscape and outdoor specialty firms, and decorating specialty firms. The study was fielded in December 2017 and January 2018.