Despite a slowdown in Q3 2024 construction sector activity, home renovation professionals express optimism for Q4, according to Houzz’s latest Renovation Barometer.
Despite this overall decline, business performance was better among architectural and design businesses, for which the indicator remains above the 50-point line. Businesses in the construction sector, on the other hand, reported a decline in business activity compared with Q2, dipping below the 50-point line. Businesses across all sectors remain optimistic about activity in the coming quarter.
“Business activity slowed in Q3, especially in the construction sector, with fewer project inquiries and commitments compared with Q2,” said Marine Sargsyan, Houzz staff economist. “However, the outlook for Q4 is more positive, especially among architectural and design firms, driven by anticipated economic growth, declining interest rates and larger project budgets. Those anticipating gains cite these favorable conditions, while others remain cautious due to economic uncertainty, current interest rates and tighter budgets. The broader political environment, including uncertainty around upcoming elections, also adds to the industry’s caution.”
Q4 2024 Construction Sector Barometer reports that the Expected Business Activity Indicator related to project inquiries and new committed projects increased 10 points to 62 for Q4 (from 52 in Q3) for construction pros. Compared with Q3 2024, Q4 expectations for project inquiries increased 7 points to 59 and new committed projects increased 12 points to 64. The index is above 50 points suggesting businesses expect Q4 performance to be better than Q3.
The Project Backlog Indicator is 10.5 weeks in the beginning of Q4, which is 0.9 weeks shorter than a year ago. Build-only remodelers report a substantial decrease of 2.3 weeks to 8.3 weeks, while design-build remodelers report a 0.6 week increase in wait times at 12.8 weeks.
The Recent Business Activity Indicator related to project inquiries and new committed projects decreased to 47 in Q3 2024, down 5 points from Q2, indicating slower business activity in Q3 compared with Q2. This is driven by a 6-point decrease in project inquiries to 46 in Q3, relative to the previous quarter, and a 4-point decrease in new committed projects to 48. Among the two reporting groups, build-only remodelers reported a larger dip in recent business activity (from 53 in Q2 to 46 in Q3), while design-build remodelers reported a 3-point decline (from 51 in Q2 to 48 in Q3).
Q4 2024 Architectural and Design Services Sector Barometer reports the expected Business Activity Indicator related to project inquiries and new committed projects increased to 71 in Q4 (up 11 points from Q3) for architecture and design pros. This is driven by a 13-point increase in expectations for project inquiries and a 9-point increase in expectations for committed projects (73 and 69 points, respectively). Both architects and interior designers report an increase in expectations for Q4, up 17 points for architects (60 in Q3 and 77 in Q4) and 1 point for interior designers (60 in Q3 to 61 in Q4).
The Project Backlog Indicator is 6.3 weeks in the beginning of Q4. Backlogs are up by 0.2 weeks compared with last year (6.1 weeks). This slight year-over-year increase is driven by architects, who report 7.8 week wait time, up 0.4 weeks from last year. Interior designers reported a 0.2-week decrease in wait times (3.9 weeks in Q4 2024) compared with last year (4.1 weeks in Q4 2023).
The Recent Business Activity Indicator related to project inquiries and new committed projects decreased to 54 in Q3 (versus 60 in Q2). This decrease is driven by a dip in project inquiries (down 8 points from Q2 to 52 in Q3) and new committed projects (down 5 points from Q2 to 55 in Q3). While the business activity indicator remained at 60 for the architects, interior designers reported a significant decline in business performance. The index dipped 17 points, going below the 50-point line.