The Q4 2018 Houzz Renovation Barometer, which tracks residential renovation market expectations, project backlogs, and recent activity among business in the construction sector, points to a strong outlook for the market in the final quarter, according a press release from the company.

The Renovation Barometer is based on a quarterly online survey sent to a national panel of businesses with an online profile on Houzz. The Barometer keeps pulse on the market through three indices, the Expected Business Activity Indicator, the Backlog Indicator, and the Recent Business Activity Indicator.

In the construction sector, the Barometer's Expected Business Activity Sector related to project inquiries and new projects was up six points relative to Q3. The Backlog Indicator decreased to 4.5 weeks nationally in Q4, a two week decrease from the previous quarter and a half week lower from the year-earlier period. The Recent Business Activity Indicator was up six points relative to the previous quarter, indicating an increase in both project inquiries and new projects.

For architects and designers, the Expected Business Activity Indicator related to project inquiries and new projects decreased five points relative to Q3. The Recent Business Activity Indicator for architects and designers increased three points, however, from the previous quarter. Backlogs for architects and designers decreased to 5.1 weeks nationally, down half a week from the third quarter and was consistent with backlogs from the year-earlier period.

“Home renovation professionals experienced consistent new business gains and backlogs in the third quarter in both sectors, fueling optimism for the year end,” said Houzz's principal economist, Nino Sitchinava. “While market fundamentals, such as high home equity, aging homes, and older homeowners staying in place, drive the demand nationally, southern and western regions continue to be shaped by recent hurricane and wildfire activity.”

Sitchinava also said the rising cost of raw materials and the skilled labor shortage continues to affect all regions and sectors in the construction industry.

All three Houzz indices are based on survey questions asked to businesses and are computed for the nine U.S. Census regions in addition national estimates. The national indices are computed using industry subsector weights and regional weights derived from the 2016 U.S. Census County Business Patterns survey.