Optimism prevails for 2019 with more than half of residential renovation and design companies cite a positive outlook for 2019, according to the 2019 Houzz U.S. State of the Industry. The report provides an outlook on 2019 and review of 2018 performance for residential renovation and design businesses based on data reported by nearly 4,800 professionals in the Houzz community. Although less bullish than the last five years, companies across all industry sectors cite a positive outlook for 2019.

“Residential construction and design service professionals large and small have sustained a remarkable multi-year run with upper-single to double-digit revenue growth,” said Nino Sitchinava, Houzz principal economist. “Based on qualitative feedback, the recent deceleration in growth of construction services is likely a function of capacity constraints due to labor shortage, rather than a contracting demand. That said, it is clear that the remodeler's mood with respect to the economy is quickly changing and clouding their business outlook.”

More than half of companies cited optimism for 2019 (58-80%), although this is less than last year (71-88%). The majority of companies among six of the seven industry groups expect profits to increase in 2019 (63-70%) and revenue growth in the upper single digits (8-9%).

Confidence in the national economy wavers: While companies maintain a positive outlook on the demand for their services in 2019, they are more likely to expect the national economy to deteriorate over the coming year (35-61%) than improve (11-18%).

Hiring continues amidst tight labor market: One-fifth of design-related and over a third of construction-related industries plan to hire in 2019, though companies anticipate challenges to labor availability and costs in the year ahead.

Construction sector faces rising costs: In 2018, firms across sectors experienced widespread challenges in the rising costs of doing business, with the construction sector reporting the greatest impact (76-81%). At least half of remodeling and design companies expect the costs of doing business to increase in 2019 (48-68%).

Revenue growth positive despite deceleration: While average annual growth remained positive in 2018, five of the seven industry groups experienced a notable deceleration in average annual growth rates (five to eight percent), compared to 2017 (8-11 %). These trends are consistent among businesses of all sizes. That said, over half of companies feel that 2018 revenues met or exceeded their expectations (58-65%).

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