The coronavirus (COVID-19) pandemic has had a significant impact on residential renovation market expectations, according to the Q2 2020 Houzz Renovation Barometer. In addition to market expectations, Houzz's quarterly barometer tracks project backlogs and recent activity in both the construction sector and architectural and design services sector.

According to Houzz, more than four in five construction sector firms and architectural and design sector firms have been impacted by COVID-19 and one in seven anticipate a future impact as a result of the virus. The most common effects of the virus on businesses are project delays, fewer new business inquiries, and project cancellations. In order to combat the virus and attempt to limit its spread, construction firms reported implementing new safety guidelines, closing offices or storefronts temporarily, and deferring new employee hiring. Additionally, in an effort to reduce face-to-face interaction, over a quarter of construction firms have begun accepting online payment and invoices, according to Houzz.

“Despite beginning the year confidently, with a long backlog of work and high expectations, firms in the residential construction sector and the architectural and design services sector have experienced a sudden, dramatic shift in the wake of the COVID-19 pandemic,” Marine Sargsyan, Houzz senior economist, said in a prepared statement. “For the first time since launching the Houzz Barometer in 2015, a greater proportion of firms reported quarter-over-quarter decreases than those reporting increases."

According to Houzz, while short-term indicators report a severe impact on the home improvement market, a neutral to good outlook for 2020 remains among the majority of both architectural and design services and construction sectors.

The Renovation Barometer is based on a quarterly online survey to businesses with online profiles on Houzz. The barometer reports on the renovation market via its three indices: the Expected Business Activity Indicator, the Recent Business Activity Indicator, and the Project Backlog Indicator.

In the construction sector, the Expected Business Activity Index—related to project inquiries and new committed projects—declined dramatically to 18 in the second quarter from 74 in the first quarter. The index reflected significant decreases in both expectations for project inquiries and new committed projects for both design-build remodelers and build-only remodelers. The construction sector Recent Business Activity Index—related to project inquiries and new committed projects in the most recent quarter—decreased 17 points from the first quarter to 48 in the second quarter. The decline was driven by both project inquiries and new committed projects.

The construction sector Project Backlog Indicator remained steady marginally to 5.4 weeks nationally at the start of the first quarter in 2020. Project backlogs in the construction sector are down 1.1 weeks from the second quarter in 2020. Backlogs remained stable for build-only remodelers and project backlogs decreased 0.1 week for design-build remodelers from the previous quarter.

For architects and designers, the Expected Business Activity Indicator decreased dramatically to 35 in the second quarter of 2020 as a result of decreased project inquiries and new committed projects. The Recent Business Activity Indicator decreased 18 points from the previous quarter as a result of fewer project inquiries and new committed projects. The Project Backlog Indicator for architects and designers decreased a week from the first quarter to 3.6 weeks on average nationally.

The Q2 2020 Houzz Renovation Barometer gathered responses from 2,055 professional Houzz users, including 342 build-only remodelers and 750 design-build remodelers. The Expected Business Activity and Recent Business Activity Indicators are computed on a seasonally adjusted index of 0 to 100, with index values over 50 indicating a greater proportion of respondents reporting quarterly increases in project inquiries and new committed projects than those reporting decreases. All indices are computed individually for the sectors as well as for the nine Census Bureau regions using industry subsector and regional weights derived from the 2016 U.S. Census County Business Patterns Survey. The Project Backlog Indicator, based on wait times on the start date for midsize projects, is reported without seasonal adjustments.