2020 Houzz U.S. State of the Industry reveals concerns over rising material costs
February 19, 2020 | 1:27 pm CST
PALO ALTO, Calif. - The 2020 Houzz U.S. State of the Industry, which provides an outlook for residential renovation and design businesses, showed that companies across all industry sectors have an optimistic outlook for 2020, following positive 2019 results. But there is also rising concern over higher costs of doing business.
“The findings from this year’s Houzz State of the Industry show continued momentum for the industry in its tenth year of expansion,” said Nino Sitchinava, Houzz principal economist. “While revenue growth slowed notably in 2019 and businesses expect continued growth deceleration into 2020, the positive outlook is prevalent across all industry groups and even improved when it comes to the health of the national economy.
"A major headwind in 2019 was rising costs of products and materials, linked by many businesses to increased tariff actions levied against popular construction products and materials. Elevated costs of products and labor continue to be the top challenges facing businesses going into 2020.” 

2020 U.S. State of the Industry: Major findings

Businesses maintain a positive outlook: More than half of residential renovation and design companies on Houzz predict that 2020 will be a good or very good year (65 to 82 percent), reflecting a slight increase from expectations for 2019 a year ago (58 to 80 percent). While businesses across the seven industry groups expect 2020 revenue growth to range from 4.2 to 9.1 percent, five of the seven industry groups have lowered their 2020 growth expectations by 0.5 to 1.3 percentage points compared to their 2019 growth expectations.
Improved expectations about the national economy: A positive outlook on the national economy is shared by a greater share of businesses (15 to 23 percent) compared to 2019 (11 to 18 percent), while expectations of an economic decline are significantly less prevalent (24 to 43 percent) than last year (35 to 61 percent). A majority of companies across all industry groups are optimistic that the demand for their services will increase in 2020 (58 to 69 percent) and most expect no change in local economies.
Many expect to hire in 2020, yet fewer hired in 2019: Many companies continue to expect labor availability and costs to worsen in 2020. Still, more than a third of general contracting, design-build and building and renovation specialty companies (35 to 38 percent) and a fifth of architectural and interior design companies (20 percent, each) expect to hire in 2020. Interestingly, a smaller share of companies across all industry groups hired in 2019 compared with the previous year. 
Product and material costs are top challenge: Following widespread increases to the costs of doing business in 2019 (55 to 78 percent), product and material costs are cited as the most significant cost driver by six of seven industry groups (compared to five of seven groups in 2018). A large share of companies link the rising costs to a negative impact of tariffs on businesses in 2019 (23 to 34 percent), with architects and design-build companies most likely to cite a negative impact (34 percent, each). Businesses report a wide range of products and materials impacted by tariffs, from metal, steel and wood to cabinets, tile, and quartz.
Revenue growth notably slowed in 2019: While revenue continued to increase in 2019, six out of seven industry groups experienced a notable deceleration in average revenue growth (3.1 to 6.1 percent) compared with 2018 (5.6 to 8.2 percent). Building and renovation specialty companies are an exception, reporting average revenue growth on par with 2018 (6.1 percent in 2019 versus 6.5 percent in 2018). 
The Houzz U.S. State of the Industry was conducted among home renovation firms in the Houzz U.S. community that offer services related primarily to residential renovation and/or design. Companies were grouped into seven industry sectors including, architects, interior designers, general contractors and remodelers, design-build firms, building and renovation specialty firms, landscape and outdoor specialty firms, and decorating specialty firms. The study was fielded from December 3, 2019 to January 10, 2020. 
For more information, visit Houzz.com.

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About the author
Michaelle Bradford | Editor

Michaelle Bradford, CCI Media, is Editor of Closets & Organized Storage magazine and Woodworking Network editor. She has more than 20 years of experience covering the woodworking and design industry, including visits to custom cabinet shops, closet firms and design studios throughout North America. As Editor of Closets & Organized Storage magazine under the Woodworking Network brand, Michaelle’s responsibilities include writing, editing, and coordinating editorial content as well as managing annual design competitions like the Top Shelf Design Awards. She is also a contributor to FDMC and other Woodworking Network online and print media owned by CCI Media.