Each quarter The Farnsworth Group provides its Farnsworth Contractor Index to the building products industry, in which we survey hundreds of residential contractors and installers to understand their sentiment on current business activity as well as their future expectations and mindset.
We survey hundreds of residential contractors from five main areas:
- Remodeling Contractors (Remodelers, GCs)
- Exterior Contractors (Roofers, Siding/Window Contractors)
- Finish Contractors (Painters, Flooring Contractors, Carpenters, Drywall)
- Mechanical Contractors (Plumbers, Electricians, HVAC)
- Landscape Contractors (Landscapers, Decking Contractors, Concrete)
In both Q3 and Q4 of 2022 we are seeing strong contractor confidence because of their prospects in the repair and remodel side of the housing industry.
Contractors Still Reporting High Backlogs of Work to Be Done
Most trade segments reported steady backlogs of work to be done, with remodeling contractors reporting 9 weeks of lead time, keeping Pros busy for the time being.
Material Availability Pains Easing for Most Contractors
The decline in demand for home improvement products by DIYers, along with supplier side resolutions of inventory challenges, has eased some of the material availability pains for contractors.
While material availability challenges have been easing, contractors are still struggling to fill labor gaps on their job sites and to shorten the backlog of project requests before those leads turn cold.
As we know, our industry has more job openings than we’ve ever seen. Trades that are toughest to find continue to be related to mechanical and technical trades like HVAC, electrical, and plumbing.
Contractor Confidence in Their Close Rates is Declining
While the quality of home improvement project leads remains strong, for the entire year of 2022 we have been seeing remodeler's confidence in their close rates going down compared to the close rates remodelers experienced in 2021. That being said, any score above a 5 on these scales represents positive remodeling contractor sentiment regarding their sales close rates.
Exterior, mechanical, finish, and landscape contractor confidence paints a slightly different story than does remodeling contractor confidence. When compared to Q1 2022 and Q2 of 2022, Q3 and Q4 confidence among these contractors remains steady or even slightly improved. Heading into 2023, we are seeing home improvement budgets tightening for DIYers and Pros alike which is driving some changes in contractor sentiment.
In December findings of our DIY & DIFM Monthly Home Improvement Tracker report, 45% of DIFM homeowners shared that if they had to postpone a contracted project, it was due to the cost. This is up 50% compared to just one year ago, and contractors are feeling the effects, largely because homeowners are becoming increasingly sensitive around total project costs and likely requesting quotes from multiple contractors.
We anticipate that contractor close rates will continue to decline as more homeowners wait until it is less of a strain on their budget or as homeowners field bids from multiple contractors to find a lower price.
Since contractors experience seasonality more that other kinds of home improvement professional, it's informative to view the quarterly data from a year-over-year perspective.
Home Improvement Sales in 2020 and 2021 achieved unseen levels that stakeholders throughout the building materials industry knew would be pulled back in future years.
- Remodeling Contractor confidence down 6.7% compared to Q4 of 2021 but up 3% compared to Q4 of 2020.
- Exterior Contractor confidence down 13% compared to Q4 of 2021 but steady compared to Q4 of 2020.
- Mechanical Contractor confidence down 4% compared to Q4 of 2021 but up 8% compared to Q4 of 2020.
- Finish Contractor confidence up 5% compared to Q4 of 2021 and up 12% compared to Q4 of 2020.
- Landscaping Contractor confidence down 7% compared to Q4 of 2021 but up 8% compared to Q4 of 2020.
Contractor Confidence Looking Ahead to Q1 of 2023 Remains High
Contractor confidence in getting business over the next 6 months remains high overall, possibly due to the long lead times still being reported and reporting of high quality leads even though close rates are down.
This confidence among contractors is in stark contrast to NAHB findings of the lowest builder sentiment since 2012 as of October 2022.
Because of the amount of home equity available to homeowners and our monthly DIY/DIFM Home Improvement Tracker still highlighting strong intent for starting new home improvement projects, not to mention aging housing stock and lower mobility rates, contractors can be confident in demand for repair and remodel services in 2023 and 2024 despite a cooling housing market.
