Pros Are Optimistic About 2024 After a Challenging 2023
Home industry groups expect revenue growth despite rising costs, the 2024 U.S. Houzz State of the Industry report finds
More than 3 in 5 residential building and design professionals expect that 2024 will be a good or very good year, according to the just-released 2024 U.S. Houzz State of the Industry report. Following an industrywide dip in revenue growth in 2023, pros across sectors are forecasting revenue increases this year — even as the costs of doing business continue to rise.
“Home industry professionals have greater optimism heading into 2024. They are expecting to turn the tide following a challenging year, when economic conditions, such as inflation and rising costs of labor and materials, resulted in fewer and smaller-scope projects,” says Marine Sargsyan, Houzz staff economist. “With positive signs that inflation is easing somewhat and interest rates are stabilizing, they anticipate an increase in the demand for their services in 2024. Many pros adopted new processes and became more selective with the types of projects they’ll take on, making their businesses more resilient.”
Here’s what the report reveals about firms’ expectations for 2024 and performances in 2023.
“Home industry professionals have greater optimism heading into 2024. They are expecting to turn the tide following a challenging year, when economic conditions, such as inflation and rising costs of labor and materials, resulted in fewer and smaller-scope projects,” says Marine Sargsyan, Houzz staff economist. “With positive signs that inflation is easing somewhat and interest rates are stabilizing, they anticipate an increase in the demand for their services in 2024. Many pros adopted new processes and became more selective with the types of projects they’ll take on, making their businesses more resilient.”
Here’s what the report reveals about firms’ expectations for 2024 and performances in 2023.
Revenue and profits expected to increase. In line with that generally optimistic outlook, firms across all seven industry groups have positive expectations for revenue and profits in 2024.
More than 3 in 5 interior designers (62%), for example, anticipate an increase in revenue, and nearly as many (59%) expect an uptick in profits.
Among construction businesses, 61% of building and renovation specialists expect increased revenue and 56% expect a boost in profits.
More than 3 in 5 interior designers (62%), for example, anticipate an increase in revenue, and nearly as many (59%) expect an uptick in profits.
Among construction businesses, 61% of building and renovation specialists expect increased revenue and 56% expect a boost in profits.
Revenue growth estimates rebound. All industry groups expect a higher average annual rate of revenue growth than they forecast at the beginning of 2023.
For example, at the beginning of 2023, interior designers and architects cautiously forecast growth rates of 3% and 0.3%, respectively. In contrast, in 2024 they anticipate 8.9% and 5.3% growth rates, respectively.
In the construction sector, building and renovation specialists have the highest anticipated annual rate of revenue growth (8.1%) this year. A year ago, that group anticipated a 1.3% annual rate of growth.
For example, at the beginning of 2023, interior designers and architects cautiously forecast growth rates of 3% and 0.3%, respectively. In contrast, in 2024 they anticipate 8.9% and 5.3% growth rates, respectively.
In the construction sector, building and renovation specialists have the highest anticipated annual rate of revenue growth (8.1%) this year. A year ago, that group anticipated a 1.3% annual rate of growth.
Expected demand for services improves. More than half of businesses (54% to 62%) in all seven surveyed groups expect heightened demand for their services in 2024. Those percentages are more than double what they were at the beginning of last year, when only 21% to 32% expected improvements in demand.
Decorating specialists (62%) feel the most confident, closely followed by specialty building and renovation firms and design-build firms (both 61%).
By and large, residential remodeling and design businesses expect that the national economy will worsen; however, they have mixed expectations about their local economies.
Decorating specialists (62%) feel the most confident, closely followed by specialty building and renovation firms and design-build firms (both 61%).
By and large, residential remodeling and design businesses expect that the national economy will worsen; however, they have mixed expectations about their local economies.
Labor availability expected to worsen, and costs to rise. Labor shortages remain a persistent problem in the industry. As in 2023, more firms in six of the seven reporting groups predict that labor availability will worsen rather than improve in 2024. Decorating pros alone expect labor availability to remain relatively unchanged.
Expectations of rising labor costs also are widespread, with a greater percentage of firms (38% to 58%) bracing for higher costs compared with the previous year (24% to 35%).
Expectations of rising labor costs also are widespread, with a greater percentage of firms (38% to 58%) bracing for higher costs compared with the previous year (24% to 35%).
Product and material availability expected to improve, and costs to rise. More companies expect product and material availability to improve than to worsen in 2024. Interior designers are the most optimistic (47%), and landscaping and outdoor pros are the least optimistic (33%).
However, an even larger share of businesses in 2024 expects the cost of products and materials to increase than in 2023 (43% to 68% in 2024 compared with 25% to 43% in 2023).
However, an even larger share of businesses in 2024 expects the cost of products and materials to increase than in 2023 (43% to 68% in 2024 compared with 25% to 43% in 2023).
Review of 2023
Revenue growth slowed. Most residential design and construction firms reported a deceleration in annual revenue growth in 2023 compared with 2022.
Average annual revenue growth for architects dropped by 1.8% in 2023 — the most significant reduction among that group in a decade. Decorating pros, along with landscaping and outdoor pros, experienced the sharpest drop in 2023, with average revenue decreasing by 1.9% each. Design-build firms, on the other hand, experienced only a slight dip (-0.2%) year over year.
Only 2 of the 7 reporting groups — interior designers and general contractors — reported somewhat positive revenue growth (1.1% and 0.4%, respectively) in 2023.
Revenue growth slowed. Most residential design and construction firms reported a deceleration in annual revenue growth in 2023 compared with 2022.
Average annual revenue growth for architects dropped by 1.8% in 2023 — the most significant reduction among that group in a decade. Decorating pros, along with landscaping and outdoor pros, experienced the sharpest drop in 2023, with average revenue decreasing by 1.9% each. Design-build firms, on the other hand, experienced only a slight dip (-0.2%) year over year.
Only 2 of the 7 reporting groups — interior designers and general contractors — reported somewhat positive revenue growth (1.1% and 0.4%, respectively) in 2023.
Profits rose for many. Despite those revenue declines, more firms in 6 of the 7 industry groups reported profit increases than decreases in 2023.
Nearly half (47%) of interior designers showed gains, whereas fewer than a quarter (23%) showed a decline. More than 40% of businesses in the construction sector — general contractors, design-build firms, and building and renovation specialists — showed profit gains in 2023.
Decorating pros were the sole group with firms reporting more profit decreases (39%) than increases (38%).
Nearly half (47%) of interior designers showed gains, whereas fewer than a quarter (23%) showed a decline. More than 40% of businesses in the construction sector — general contractors, design-build firms, and building and renovation specialists — showed profit gains in 2023.
Decorating pros were the sole group with firms reporting more profit decreases (39%) than increases (38%).
Business costs increased. The majority (61% to 78%) of firms in each industry group reported an increase in the cost of doing business in 2023. Although that share decreased slightly from 2022, when it was 70% to 92%, the percentage remains notably high.
Businesses in the construction sector were among those most impacted, with 78% of general contractors, 74% of design-build firms, and 76% of building and renovation specialists reporting cost increases.
Businesses in the construction sector were among those most impacted, with 78% of general contractors, 74% of design-build firms, and 76% of building and renovation specialists reporting cost increases.
Materials and labor drove cost hikes. The majority (60% to 78%) of residential construction and design firms — all business groups except architects — attributed the rising cost of doing business in 2023 primarily to product and material price increases. Additional contributing factors include employee wages or benefits (which more than half of building and renovation firms cited as a top driver) and software costs (which emerged as the top cost driver for architects, at 44%).
Rising prices and finding customers posed challenges. Construction pros, decorating pros and landscape and outdoor pros all identified the increased cost of doing business as their top challenge in 2023. More than a quarter of architects and interior design firms, however, struggled primarily with finding prospective customers.
Hiring increased. More businesses reported an increase in the number of their employees than those reporting a decrease in 2023.
One in 5 specialty building and renovation firms (20%) increased its headcount, as did 19% of general contractors, remodelers and builders. Hiring activity was more moderate among architects and interior designers, with 12% and 10% of firms, respectively, adding staff.
One in 5 specialty building and renovation firms (20%) increased its headcount, as did 19% of general contractors, remodelers and builders. Hiring activity was more moderate among architects and interior designers, with 12% and 10% of firms, respectively, adding staff.
The complete 2024 U.S. Houzz State of the Industry report can be found here.
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The study, which is conducted annually, represents the views of professionals in seven industry groups: architects, interior designers, building companies (including general contractors, remodelers and builders), design-build firms, building and renovation specialty firms, landscape/outdoor specialty firms and decorating specialty firms.