Dive Brief:

• A majority of home renovation and design companies are expecting revenues to grow an average of 10 to 12% this year compared to 8 to 10% last year, according to the 2017 State of the Industry report from Houzz, which surveyed 4,800 professionals that use the home design website.

• Respondents said they would look to larger-budget projects (50 to 63%) and more marketing (45% to 56%) as well as to hire more employees for both construction companies (40 to 46%) and design firms (23 to 26%).

• Three in five respondents said business costs increased in 2016, due in large part to rising labor, product and material expenditures.

Dive Insight:

The report highlights the bullish sentiment surrounding the residential construction market this year as a continued shortage of supply spurs higher home prices, greater investment in repairs and remodels and, slowly, an increase in new building.

As inventory continues to lag, the repair and renovation market has reaped the benefits. The fourth-quarter Houzz Renovation Barometer posted levels of continued optimism with year-over-year readings of 61 or higher across industry groups. A similar index kept by the National Association of Home Builders forecasts 1 to 2% growth in the category in the next two years with its reading slipping four points to 53 in the fourth quarter from the prior quarter. It is the 15th-consecutive period for which the index has read above the break-even mark of 50.

In its annual Cost vs. Value Report, Remodeling magazine found that, on average, a remodeled home will recoup 64.3% of the investment in the upgrade upon resale, up slightly from 64.2% in 2016.

Concerns linger over the skilled-labor shortage and its impact on project schedules, however. NAHB Chief Economist Robert Dietz recently noted that labor continues to be a top concern for residential builders and remodelers and the situation is not expected to turn around in the near-term as more projects come online.

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