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Industry trends, predictions, and more!
Since 2008, we’ve sent our Market Predictions Survey to our GuildQuality members (and now, our Best Pick Reports and Five Star Rated members, too!) to get a better understanding of the state of the residential construction industry. This report contains a summary of the feedback we received regarding Q2 2021.
In this review, we’ll examine the results indicating how our respondents feel about the current state of the market, how they expect the market and their company performance to change in 2021, what their long and near-term strategies are, which industry trends they believe are rising and waning, and finally, how they feel about qualified labor this quarter.
Current State of the Market
Overall, feelings about Q2 2021 improved from Q1 2021. The percentage of members reporting feeling Good or Excellent about today’s market increased by 7% in Q2 2021 – 88% vs. 81%. This number is vastly higher than the 59% we saw in Q2 of 2020, which indicates that despite the pandemic, businesses continue to feel optimistic. Consequences of the pandemic such as working from home has led to an increase in home improvements and renovations. This may be part of what is fueling the outlook on the current market.
Unsurprisingly, the percent of Poor and Horrible responses decreased slightly, from around 3% to 2%. Compared to Q2 last year, when we saw 11% for Poor and Horrible responses, our members feel that the industry is in a much better state. However, this quarter’s percentage is still a little higher than the 1.5% in Q1 of 2020. The percent of Fair responses decreased to 10%, down 6% from last quarter.
While the last year has been a bit of a roller coaster ride, the percentage of Good or Excellent responses for the current state of the market this quarter is the highest it has ever been since we started asking this question on our market predictions survey. We have heard from many of our members that this has been their busiest time in their company’s history.
Expected Change in the Market
We also asked respondents to share how they expected the market would change over the quarter.
Since the start of the pandemic, when Remain the Same responses took a sharp dive in Q2 2020, the number of people predicting that the market will stay the same has increased. Q2 of this year continues that trend. About 53% of respondents believe the market will stay the same. For those who do see change ahead, more are optimistic than pessimistic, although less so than last quarter. 36% of respondents predicted the market would improve in some way (better than 31% in Q4 2020 but down from 41% in Q1 2021), and 11% believe we’ll experience a negative change (this number is slightly up from last quarter’s 9%).
Overall, respondents feel that the market is holding steady, and chances are it will get better rather than worse.
Expected Change in Company Performance
When it comes to company performance, the overall outlook has returned to where it was in Q2 of 2020. About 58% of members responded with Improve or Significantly Improve, a fairly significant decrease from 68% in Q1.
This quarter, like last, about 4% of respondents believe their company performance will Decline or Significantly Decline, which is 7% lower than Q2 2020, during the start of the pandemic. While 4% is a bit higher compared to our pre-pandemic numbers in Q1 2020 (2%), the number is lower than during the beginning of the pandemic and has held steady over the last two quarters.
These numbers, along with the 37% of Remain the Same responses (up 9% from last quarter), indicate that our members are feeling optimistic or at least stable about company performance. Labor and material shortage challenges may factor into the decrease in responses indicating predicted improvement.
Qualified Labor Rating
The ongoing labor shortage has been a significant challenge for businesses in the residential construction industry for many years now, which is why we added the Qualified Labor Rating and the Qualified Labor Change Prediction to our Quarterly Market Predictions Report in 2018.
This quarter’s Qualified Labor rating isn’t positive, decreasing even more from the previous two quarters. The percentage of Poor and Horrible responses was 57% (up 17% from Q1’s 40%), while the percentage of Good and Excellent responses was 17%, a decrease of 4% from Q1.
The percentage of Fair responses decreased from 39% in Q1 2021 to 26% this quarter. This percentage is the lowest it has been since we began asking this question.
The increase in Poor and Horrible responses and decrease in Fair responses indicates that the state of labor is still posing a great challenge in the industry.
We’ve been hearing from many GuildQuality members that they are extremely busy right now, sometimes booked out months in advance with work. They need to hire additional help, now more than ever, and that demand is likely contributing to these results.
“We are taking the hiring process very seriously and cautiously. Rather than rushing to fill a seat, we’re taking the time to find the right people so that they are a long-term fit for the company and not a quick fix for the immediate problem.”
“We continue to battle labor shortages and aging average for our field team by hiring young and training those new team members into seasoned lead carpenters. We have also worked with high schools and colleges to bring in students to shadow and intern with us.”
Qualified Labor Change
We also asked our Guildmembers, “Relative to the last six months, how has the availability of qualified labor changed?” This quarter, 5% reported a positive change (down from 11% from Q1 2021), while 50% reported a negative change (a significant increase from 27% last quarter).
The percentage of responses indicating the state of qualified labor has not changed was around 45% this quarter.
These predictions are much more negative than we’ve seen in any year since this question was added in the second half of 2018. Most respondents expect that qualified labor will continue to be a large challenge in the coming months.
Many respondents mentioned the hiring challenges in their near-term and long-term strategies comments. If you are facing this problem, you are not alone. Frequently mentioned approaches and solutions to the labor shortage issue include more advertising for hiring, getting help from recruiters, providing on-the-job training for new and less experienced employees, and increasing training efforts for existing employees.
Emerging Trends
We also asked respondents what new or existing trends they saw more of over the last quarter. The three most common emerging trends were:
- Upgrades to spaces to make them more friendly for spending a lot of time at home (e.g., work-from-home space, flexible and multi-purpose spaces for at-home learning, workouts, etc.)
- Colorful interior elements, such as walls and cabinets
- Outdoor living spaces
“Bolder colors seem to be in right now—greens, whites, reds—not just black and gray. With people having spent so much time at home, they seem to want their homes to look nice.”
“We are seeing a lot more interest in outdoor expansions to the house—porch overbuilds, patio and bi-fold doors, outdoor fireplaces, decks.”
Like last quarter, homeowners are investing in improvements or additions to their current living space to adapt to the increased time spent at home. They may also be improving their current homes instead of looking to buy, due to increased housing prices.
People are making improvements and changes to their home to personalize it for their needs specifically, and with that is coming more demand for visual interest and comfortable living spaces. Being cooped up while working remotely or not going out as much has likely led people to reconsider stark white walls and increased their interest in creating outdoor living areas.
Waning Trends
In addition to emerging trends, we asked respondents which trends they are seeing less of in Q2 2020. According to their answers, here are the trends they believe are on the way out:
- Carpet
- Hardwood floors
- Formal and highly separated living spaces
- All-white color schemes, particularly white kitchens and cabinets, as well as gray color schemes
“Hardwoods trending out due to maintenance issues. LVP and EVP widely accepted.”
“…some customers are taking out walls or partial walls to further open up their homes.”
“All white interiors are trending down.”
Near-term Strategies
- Hiring
- Focusing on marketing efforts, including advertising for hiring
- Adjusting processes, schedules, and pricing to accommodate material shortages and delays
“Huge hiring campaign, paid for professional recruitment video, leveraging social media to get word out on open positions and growth opportunities in remodeling careers.”
“Staying in touch on a personal basis with clients on waiting list, encouraging clients that we may be a bit slower in turnaround time for answers about project questions but we haven’t forgotten about them. Looking for more ways to do things quickly and accurately, harnessing technology to do more.”
“Supply chain is our biggest challenge. We are cautious about the types of jobs we are willing to take on.”
Long-term Strategies
- Developing and improving processes and systems
- Diversifying services and offerings as well as geographic market coverage
- Marketing to build and maintain a good local reputation
“Improve project management strategies. Document processes for repeatability.”
“…improving our routing, logistics, and delivery of services for better results in less time.”
“Maintaining open communication with our customer base and implementing strategies that address their issues head on.”
“Expanding our geographic coverage, investing in new remodeling segments.”
“Post-job marketing activities to remain connected to our customers; new work and referrals from our customers.”
Additional Comments
Below are a few additional comments from our respondents that we thought encompassed their overall struggles and successes of working within the residential construction industry.
“It would be good to hang onto the new and move ahead. Those old conditions and plans are never coming back, so it would be more productive to find the best way to work in the brace new world. NKBA and NARI have done great jobs of trying to find/share new best practices. Good to listen to those podcasts and blogs.”
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“Material shortages, and price increases, and lack of labor are making things very challenging. There is not a shortage of projects to be completed.”
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“After doing this for nearly 20 years, I’m focusing on good customer service and building a great relationship with the homeowners. So many contractors come and go, over-promise and under-deliver. I’m trying to make a statement in the market.”
