This week the housing market is making sense of the spring buying season’s early results: in March existing home sales reached their highest level in 18 months while new home sales plummeted. In contrast, the home renovation market continues its steady recovery, according to our latest Houzz Renovation Barometer.
What does the Houzz Renovation Barometer show? Widespread confidence in business growth. Significantly more companies are reporting quarter-over-quarter gains than declines in business activity. Furthermore, professional confidence improved relative to Q4 2015, in part reflecting typical seasonal patterns. Professionals continue to be confident in year-over-year gains in new business and are projecting even greater optimism for the upcoming quarter.
What does the ‘widespread confidence’ mean for the home renovation market? Growth in market size in the next one to three quarters. It takes time for inquiries to convert into projects and for new projects and orders to be fulfilled and paid for. As a result of this dynamic, consumer spending will be spread over the next several months. Greater confidence now should translate into actual market growth in the near term.
Can the ‘widespread confidence’ be used to quantify the market growth rates? Yes, but not in isolation. The Houzz Renovation Barometer is designed to predict the overall market direction and turning points, and may be used in the future as a key component of a forecasting model. For example, the Joint Center of Housing Study (JCHS) at Harvard University relies on several indices to predict growth in the home improvement market. The JCHS’ recent forecast estimated a quarterly growth rate of 6.8% for Q1 2015.
How is the Houzz Renovation Barometer different from other market trackers? It’s different in two key ways. First, the Barometer is the only study that gathers feedback on the health of the market directly from every key industry group. These groups include residential architects, designers, general contractors/remodelers and design-build firms, as well as installers, custom manufacturers and vendors in the various building/renovation and landscape/outdoor specialties. This breadth of coverage ensures comprehensive, consistent, and accurate findings. Second, the Houzz Renovation Barometer draws on very large samples of industry professionals. For example, the most recent Barometer scores were constructed based on the reported experiences of over 2,300 companies. In addition to the statistical benefits of large samples, the Barometer is the only index that can provide analysis by industry group and does so on the national, regional, state, and metro-level.
For more information on the Q1 2015 Houzz Renovation Barometer, see the full report.