2019 Houzz State of the Industry Survey

Remodelers, design-build firms, and architects generally have positive outlooks for 2019, Houzz reports in the 2019 State of the Industry Survey. Between 58% and 79% of companies report 2019 business outlooks as "Good" or "Very good," lower than the 2018 State of the Industry Survey, when more than 70% of all industry groups rated business outlooks as "Good" or "Very good."

While design and construction-related groups have largely positive outlooks for the coming year, each industry group was more conservative in its annual revenue growth projections for 2019. Surveyed architects project 5.1% annual revenue growth and surveyed remodelers and design-build firms project around 8.5% annual revenue growth, all nearly three percentage points lower than what the groups projected for revenue growth in 2018. Projected revenue growth for 2019 is the lowest it has been across all industry groups in the past five years Houzz has conducted its State of the Industry Survey.

"Residential construction and design service professionals large and small have sustained a remarkable multi-year run with upper-single to double-digit revenue growth," Houzz principle economist Nino Sitchinava said. "Based on quantitative feedback, the recent deceleration in growth of construction services is likely a function of capacity constraints due to [the] labor shortage, rather than a contracting demand. That said, it is clear that remodelers' mood with respect to the economy is quickly changing and clouding their business outlook."

National Economy and Rising Costs

2019 Houzz State of the Industry Survey

The Houzz survey finds that industry groups are largely optimistic about the demand for their services in 2019, but are more pessimistic about the future of the national economy. Nearly four in ten remodelers and design-build firms expect the national economy to deteriorate in 2019, while over 60% of architects believe the national economy will get worse.

More than a third of all industry groups expect labor availability and labor costs to worsen in 2019, consistent with Houzz's findings over the past four years. Nearly half of the surveyed remodelers and design-build firms project labor availability to get worse and labor-cost strains to increase. Additionally, close to six in ten remodelers, design-build firms, and architects project that product and materials costs will become more straining in the coming year. However, one-fifth of design groups and more than one-third of construction-related industries plan to hire in 2019, despite tighter costs, according to Houzz.

Revenue Down in 2018

2019 Houzz State of the Industry Survey

In 2018, firms across the design and construction sector reported their lowest annual revenue growth in five years. The average annual revenue growth for remodelers was down to 7.3% from 10.6% in 2017, with design-build firms and architects also reporting average annual revenue growth nearly three full percentage points less than 2017. Architects, remodelers, and design-build firms identified employee wages or benefits, products and materials, and subcontractor fees as the largest drivers of cost for business in 2018, with the increasing cost of business cited as the biggest business challenge.

The State of the Industry released by Houzz compiled answers from 4,780 firms with Houzz profiles that offer services primarily related to residential renovation and design. The survey included 1,069 remodelers, 537 design-build firms, and 679 architects and was fielded between December 2018 and January 2019.

This story originally appeared on Remodeling.