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Confident About Q1 2016

Houzz Survey Shows 14 Point Swing From Q4 2015


Seasonal cooling of market activity towards the end of the year, which is always expected in the renovation industry, was reflected in the Houzz Renovation Barometer. The South region felt less of the effects while the rainy West felt more.

The Houzz Renovation Barometer, which tracks industry optimism in market improvements in the architecture, interior design, remodeling, design-build, building/renovation and landscape/outdoor sectors posted high year-over-year readings (71-78 points out of a hundred) for the various groups in last year's fourth quarter, and showed strong confidence in the coming quarter with scores between 71 and 81.

The landscape/outdoor sector score jumped from 58 in Q4 2015 to 72 for Q1 2016; the second biggest jump among the sectors. The greater the score relative to 50, the greater the proportion of firms reporting increases in quarterly business activity (number of inquiries, number of new projects/orders, and size of new projects/orders) than those reporting decreases.

The year-over-year Barometer for all sectors exceeded 70 points for all four quarters of 2015, pointing to strong confidence in the renovation market improvements in 2015 relative to 2014.

"Both by our estimates and many other estimates of the industry, 2015 was the year that the spending in home renovations hit the level at peak prior to the recession," says Nino Sitchinava, principal economist at Houzz. "And so what were going to be expecting going forward for 2016 is expansion beyond the peak."

But she adds, "We're going to be looking at more moderate growth. If you look at business cycles, once the peak is reached, and if the industry continues on an expansionary path, the rates of growth are typically slower than those before the peak is reached."

Additionally, the Barometer posted quarter-over-quarter readings of 58-66 in Q4 2015. These scores are 8-11 percent lower than Q3 2015 scores for all industry groups except architect and interior designers (only 4 percent and 1 percent lower, respectively) and the report considered that this reflects the expected seasonal cooling of market activity towards the end of the year.

"I think considering the seasonal fluctuations in the industry, Q4 came through quite strong," states Sitchinava. "In terms of our barometer reading, were still observing scores above 50, which means that more remodeling, renovation and outdoor companies are reporting that activity is increasing than it's decreasing. For this quarter, which is considered the slowest time of the year for a lot of the industry segment, the scores are quite high."

The seasonal slowdown was felt across all regions though to a lesser extent for firms in the South. The report deemed that the wetter weather in the West in fall 2015 compared to 2014 had much to do with firms in every industry group in that region reporting weaker confidence in quarter-over-quarter gains relative to the same period in 2014.

Sitchinava felt the landscape/outdoor sector had a strong year.

"Overall the outdoor sector comes on quite well in 2015," she says. "We're seeing extremely high scores year over year as well as quarter over quarter. In both, the confidence of the professionals has remained very high and it just speaks to general strength of the market."

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November 13, 2019, 7:41 pm PDT

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