New Home Renovation Study Paints Positive Growth Picture

For the first time in several years, Seattle landscape designer and architect Lisa Port is investing in the company she’s owned with her husband for 15 years. She’s bought new computers, updated their CAD software and even bought a new vehicle. Plus, for the first time since starting the company, they are considering adding employees to help handle the workload on the books for 2015. “We’ve finally relaxed a little bit and can breathe a sigh of relief,” Port says. “This recovery might stick around.”

Port is not alone. Her sentiment is echoed by what a majority of home design and building professionals say about business conditions in 2014 and 2015, according to a new Houzz Barometer study looking at the home renovation, building and decorating markets.

Revenue

“Things are going in the right direction, finally,” says architect Matthew Lero, whose three-person firm RDM Architecture serves the Kansas City, Missouri, metro area.

He’s among the more than two-thirds of companies that reported revenue growth for 2014, according to the Houzz Barometer.

The quarterly study, conducted in January 2015, gathered responses from a national panel of more than 5,000 professionals made up of architects, builders/remodelers, interior designers, landscape professionals, specialty tradespeople and related fields such as custom cabinet manufacturers.


Things are even sunnier for the roughly 40 percent of firms that reported revenue increases of 15 to 24 percent. Meanwhile, roughly 10 percent of pros reported revenue growth of 50 percent or more in 2014.

Jon King, a builder in Boise, Idaho, also believes the tide is changing. In fact, 2014 was his best year ever financially, and he’s booked through 2015. “I have to turn down work,” he says.


But there’s usually a flip side to comeback stories. There will always be a portion of the community that isn’t experiencing the same kind of success.

The Houzz Barometer found that just under 30 percent of professionals were disappointed by 2014 results. And among those surveyed, a fifth to a third of the companies across the professional groups reported no change in revenue, or falling revenue. This would indicate that the recovery is uneven across market segments.

For Matt Clawson, vice president of family-run Clawson Construction in Danville, California, 2014 was a decent year but nothing compared with the early 2000s in his region, which has always hinged on the up-and-down success of nearby Silicon Valley. “It’s nowhere near how it was at its most profitable in the early 2000s,” he says.



The report also showed that profits may not be keeping up with revenue growth for many businesses, with some firms pointing to increases in the costs of overhead, prices of products and materials, and red tape as contributing factors.

One of Clawson’s biggest problems now is getting jurisdictions to approve projects. A recent church gymnasium project took more than three years to get permitted. “It didn’t used to take this long,” he says. “More and more counties’ are overworked and understaffed.”

But Clawson is just happy the market is better than the rock bottom many professionals experienced in 2008 at the height of the recession. “My confidence is strong,” he says. “I feel like it’s getting better and better.”



Number of New Projects

The increase in revenue is in part due to the increase in the number of projects professionals and companies are taking on. In 2014, 70 percent or more of businesses reported an increase in new business.

Landscape designer James Drzewiecki of Ginkgo Leaf Studios says that the increase in projects is probably due to pent-up demand over the years as homeowners held on tight to their pocket books waiting to see if the recovery was around to stay. Businesses that were able to weather the storm are now seeing big gains.

The increase could also be a result of professionals diversifying their businesses to tackle different kinds of projects at varying scales. Clawson says his company took on several smaller projects last year that he might not have otherwise just to keep his 20 employees busy.

And King has taken on so many new projects he’s completely booked for 2015 and is already starting to talk spring 2016. “That’s a good problem to have,” he says.


Scale of Projects

In addition to the number of projects increasing, more than 60 percent of professionals report larger contract dollars associated with new business.

King says that in the last two to three years, the amount of projects in the $800,000 to $1-million range have doubled each year. Now, he says, his biggest problem is finding experienced workers to help tackle all the new business. He’s added four people since early February and is looking to hire a couple more.

Port, and her Banyon Tree Design Studio, also is seeing an increase in the scope of projects, but just not at the same clip as the number of projects. “I still get the cute backyard path-to-the-patio project, but I’m also taking on more $200,000 projects, maybe one or two a year,” she says.

Drzewiecki also has seen an increase in the number and size of projects in the last two years. He’s taking on more involved, larger-scale projects and has even seen an increase in phased projects, for which a client invests in a much larger, more expensive project that gets implemented incrementally over the course of, say, five years. “People are willing to wait and make it bigger versus doing it all at once,” he says.



Landscape Pros Lead

Landscape professionals are enjoying the recovery a bit more than other pros, with 79 percent reporting an uptick in revenue for 2014 (compared with 67 percent of architects and designers, 68 percent of builders/remodelers, 74 percent of specialty trade and 73 percent of other industries).

Drzewiecki says it’s a good time to be a landscape professional. He says people are realizing that landscape projects are an investment in their property. “After the kitchen and bathroom, landscaping is third on the list in terms of return on investment,” he says.

Port agrees. She thinks that many homeowners are realizing that landscape projects are less disruptive and less expensive than something like a kitchen or bathroom remodel, with almost as much payoff.

Drzewiecki points to another reason he thinks landscape projects are faring better. He says that since the recession, more people have decided to travel less and instead stay home during the summer. In turn, they want to make their outdoor spaces more enjoyable for staycationing. Plus, the rise of quality outdoor fabrics, high-end grills, outdoor TVs and more is making it easier for the average homeowner to create a unique, quality outdoor living experience at home.



Looking Ahead

While 2014 looked bright, many professionals are seeing 2015 as even brighter, with more than 80 percent reporting expectations for growth in gross revenue this year as well as in profits. The report is in line with other reports, including those from the Joint Center for Housing Studies of Harvard University.

This year is already shaping up for Drzewiecki. He’s had three or four clients since the first of the year. “That’s a good sign,” he says. “I was nervous that 2013 was a one-hit wonder, but last year proved me wrong in a good way,” he says. “And I see no reason why 2015 won’t at least replicate what we saw last year.”

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