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 Q3 of 2022 we are seeing strong contractor confidence because of their prospects in the repair and remodel side of the housing industry.
Contractors Reporting Increased 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 Close Rates Declining
While the quality of home improvement project leads remains strong, we are seeing contractor close rates going down compared to Q1 2022 and Q2 of 2022, largely because homeowners are becoming increasingly sensitive around total project costs and likely requesting quotes from multiple contractors.
In October findings of our DIY Monthly Home Improvement Tracker report, 49% of homeowners shared that if they had to postpone a project, it was due to the cost. This is up significantly from 29% reporting that reality just one year ago.
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.
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.