Residential renovation and design businesses are bullish on 2022, according to the 2022 Houzz U.S. State of the Industry report, which surveyed more than 2,800 professionals in the Houzz community.

More than two-thirds of companies surveyed said they are anticipating this will be a good or very good year, and that demand for their services will continue to increase. This follows strong 2021 results with revenue growth at a four year high across the industry, outpacing expectations for the year.

“The positive outlook is prevalent across industry groups from architects and designers to builders and landscapers, despite headwinds in the form of labor and product availability and price volatility," said Marine Sargsyan, Houzz senior economist. "Accumulated home equity and other industry fundamentals continue to drive demand for improvements to aging housing stock and upgrades that will enable homeowners to stay in their homes long into retirement years.”

2022 U.S. State of the Industry Major Findings

• Confidence in 2022: The majority of residential construction and design companies on Houzz predict that 2022 will be a good or very good year (71 to 77%). For the first time since 2018, architects have the most positive outlook among the seven sectors surveyed, with nearly four in five expecting a good or very good year (77%). This is followed closely by general contractors (73%), design-build companies (73%) and specialty building and renovation firms (71%).

• Revenue growth surpassed expectations in 2021: In 2021, businesses reported their highest year-over-year revenue growth in the last four years (9 to 12%), with five out of seven groups reporting double-digit revenue growth. Three-quarters of companies across all business sectors reported that revenue growth was at or above their initial expectations for 2021 (71 to 77%). Businesses across all industry groups anticipate continued growth in 2022 of five to nine percent.

• Increased demand anticipated: More companies across all seven industry groups believe that demand for their services will increase in 2022 (41 to 54%), rather than decrease (six to 11%). Interior designers are the most confident that demand for their services will improve (54%). 

• Hiring is on the rise: More residential renovation and design companies (18 to 34%) hired employees in 2021 than in 2020 (9 to 24 percent). Design-build firms were the most likely to hire in 2021 (34%), followed by general contractors, builders and remodelers (28%) and landscaping and outdoor firms (27%). Hiring is expected to continue across all industry groups in 2022 (18 to 40%).

• Labor shortages impact cost: Companies across all industry groups expect labor availability to worsen in 2022 (41 to 55%), which affects the cost of labor. In fact, companies across all seven industry groups also expect labor costs to increase in 2022 (49 to 64%). Construction businesses are particularly concerned. The percentages of general contractors, building and renovation specialists and design-build companies that expect labor availability to worsen in 2022 have increased by 11, 11 and 10 points, respectively, compared with expectations a year ago.

• Price volatility and availability of products and materials top challenges: All industry groups listed price volatility of products and materials as one of their top challenges. Availability of products and materials is among the top challenges by six of the seven industry groups. General contractors, design-build firms, and building and renovation specialists cite price volatility (47 to 55%) and availability of products and materials (37 to 40%) as the leading challenges they faced in 2021, followed unsurprisingly by increased costs of doing business (28 to 35 percent). More than half of companies across the seven industry groups expect product and material costs to rise (53 to 72%).