Home improvement contractors remain cautiously optimistic

Even as higher material costs, labor constraints, economic uncertainty, and spottier consumer spending trends weigh on current renovation and remodeling projects, home improvement contractors remain optimistic.

The Q4 Contractor Activity Tracker, released by The Farnsworth Group and Home Improvement Research Institute, concluded that confidence among home improvement contractors is relatively unchanged from a year ago. 

The index surveyed five categories of residential contractors: remodel, exterior, mechanical, finish, and landscaping. Generally speaking, exterior contractors were the least optimistic, while mechanical contractors were the most confident. 

Overall, contractors are confident in their company’s ability to get business over the next six months, averaging 8.3 out of 10, up slightly from a year ago. Mechanical pros were the most confident at 8.9, while exterior pros ranked last at 7.8. 

The index found that 65% of contractors expect revenue to increase over the next year, down 4% annually. Mechanical pros were once again the most confident, while exterior pros were the least optimistic. Over half (55%) of pros stated that revenue had increased over the past 12 months. 

Labor availability remains an issue. While contractors have a relatively high confidence (7.7) in labor availability, a slight majority of contractors report having trouble hiring skilled laborers over the past year. Contractors also, in general, believe that labor costs will have a moderate impact on their business over the next 12 months. 

Most of the contractors surveyed reported that the average revenue per project improved over the past year. However, only 48% of exterior pros said they did, while 63% of mechanical contractors saw an increase. 

Mechanical contractors also reported being the busiest, while exterior pros reported having the lowest quantity and quality of leads of any of the categories surveyed. 

However, home improvement contractors remain optimistic overall, especially in comparison to homebuilders. Data from the National Association of Home Builders (NAHB) concluded that homebuilder confidence is up from a summer low, but is down notably year-over-year.

“There’s some different dynamics happening in those two sectors that lead the existing home contractor to be a little bit more optimistic and a little bit more confident in their ability to get business. The homeowner can tap into some equity and maybe have more desire to work on their home than they do to go buy a new one,” Farnsworth said in a recent interview with HousingWire.