Remodeling activity tapers off amidst economic standstill
Wednesday, April 15, 2020
Concerns for health and safety as well as the economic uncertainty resulting from the COVID-19 pandemic have brought about an abrupt reversal in remodeling activity in the past month.
Several recent industry surveys show that between 70 to 90% of firms engaged in remodeling and renovation have seen a substantial decline in new business inquiries along with increasing numbers of client requests for project delays or cancellations. Nonetheless, many are hopeful business will return when living and working conditions improve.
According to the just-released Q2 2020 Houzz Renovation Barometer, more than 4 in 5 firms providing residential renovation services have been negatively impacted as a consequence of the coronavirus pandemic.
Among remodelers in the construction sector, the Recent Business Activity indicator decreased 17 points, from 65 to 48, between the first and second quarter surveys due to declines in both project inquiries and new committed projects. Although project backlog volume remained steady, around three-fourths of firms report project delays, while nearly two-thirds report project cancellations.
Remodelers participating in the Houzz survey anticipate that in the near-term business is likely to slow further. For those in the construction sector, the indicator for Expected Business Activity plummeted 56 points, from 74 to 18, with three in four citing fewer new business activities.
In order “to provide an objective assessment of the impact that COVID-19 is having on the U.S. kitchen and bath industry — both at the onset of this health/financial crisis and throughout subsequent phases of recovery,” the National Kitchen and Bath Association (NKBA) last month conducted a survey to assess the initial impact COVID-19 is having on NKBA members’ businesses. On a scale of 1 to 10, with 10 indicating a “significant impact,” designers and builders as a group rated the overall impact on their business at that time at 7.4.
On average, more than half of designers and builders responding to the survey reported delayed projects, and nearly 1 in 5 reported cancelled projects. Among the reasons mentioned for the changes were customers’ desire to practice social distancing (70%) and customer financial uncertainty (65%), as well as customers’ desire to scale back projects (55%). Their own health and safety and that of their staff is also a concern, with more than two-thirds of respondents saying they had reduced activity because of their desire to practice social distancing.
These trends are occurring across the industry. A recent online poll of kitchen and bath dealers, designers and remodelers conducted by Kitchen and Bath Design News found close to 9 in 10 respondents’ were experiencing some level of negative impact from the pandemic on their business, both on their operations and their current and anticipated revenue and profit. Around 6 in 10 said delayed client decisions were a substantial problem, and more than a third have experienced project cancellations.
Even more dire, the National Association of Home Builders (NAHB) stated its survey data showed that 87% of its remodeler members were citing cancellations of home improvement projects.
Voicing concern that the pandemic could “derail” the residential construction industry, the American Institute of Architects released a report that lists among a “host of issues that are depressing the industry,” homeowners requesting project holds, particularly for home improvement projects where the household would need to interact with the construction crew.
The current outlook indicates conditions in the industry will not improve in the second quarter. It could be well into May before the economy begins to revive in fits and starts. Yet, two-thirds of remodelers in the Houzz survey are hopeful that business will pick up again in the second half of the year. If so, it is likely to be in the fall or later, assuming consumers regain their confidence in the economy and their safety.
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