183. Home Remodeling Trends With Marine Sargsyan

Welcome to another episode of Professional Builders Secrets. This episode was recorded live at the International Builder show in Las Vegas, but the content is still highly relevant for builders around the globe. Today I interview Marine Sargerson from Houzz Pro and we discuss how builders can use data driven insights to win more remodeling projects. We talk about the top motivations driving homeowners to renovate right now, which rooms are being remodeled the most, and the biggest challenges homeowners face during renovations. Enjoy the episode.

Generation X is this next big wave with 32% of the remodeling homeowners being down. But then we also have millennials coming of age and gaining some share in that model. And the one interesting fact about them, it would be them being digital natives. So they do expect this tech driven aspect everywhere in their lives. You know, for them before it was always being able to use technology to get things streamlined. Utilizing technology is not just optional, it's already essential.

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You are?

Did I get that right? From Houzz? So do you want to tell me a bit about what you do at Houzz?

I would love to. And hello. So excited to be here. My name is Marina Sarkian and I lead economic research efforts at Houzz. Our core product at Houzz is Houzz Pro, which is a project management tool and a software for designers and builders alike. It allows them to do everything for their business, manage their projects, have client communications ready to go, as well as process their payments and invoicing and all of that. My favorite thing at Houzz to do is to dig into the data, understand the business activity, learn about the design trends that homeowners are incorporating into their homes, and of course, sharing the data with our community. And that's exactly why I'm so excited to be here today.

I'm very excited to have you on.

Thank you.

And you've been speaking at IBS as well. What have you been talking on in your presentations?

I had, I had two incredible presentations with IBS's educational sessions. Those always fun. I got to share our design trends for kitchens and bathrooms as well as outdoor living. And then we also covered extensively how pros can stay relevant in this uncertain economic times by leveraging technology or making sure that their touch points with clients are always building trust. Because there is a lot of discussion on how to keep your customers happy and also make sure that they come back.

Okay, great. Well, Houzz has partnered with us on our State of Residential Construction industry report. But you do a lot of your own research as well, and you lead all of that. I'm sure you've got a great idea around all the data that's coming in. I'd love to pick your brain around remodeling trends, but can you first tell me a little bit more about the research you do?

Of course. I love partnering with you guys. So it was an incredible partnership for us as well. We do do our research. As have we. I'm for our research, I'm leveraging our 70 million of homeowners and design enthusiasts as well as on the pro side, we have 3 million professionals on house. So being able to leverage that data for my research has been incredible. In our research, what we are seeing is that homeowners tell us that they are very much motivated by having the time to do these remodels and also having the money. So in fact, 40% tell us that having the time to finally do these remodels we have are a big component as a motivation. A similar share also talks about having the financial means to do so. Personalization is a big motivator for homeowners. They are trying to make sure that they personalize their newly purchased homes. And you know, this speaks volume of how homeowners are not just moving in when they purchase a home, they really try to make it truly their own. And you know, I cannot not talk about the fact that the housing stock in the US is already 42 years old. So in median. So what that means. That means half of the homes are older than that. So what it means for homeowners is that they need to make sure that they modernize their homes. And upkeep is a big component as a motivator. I think, in fact, 20% of homeowners tell us that they had to upgrade their home due to the damage that happened due to the age of the home.

Okay. And then there's obviously natural disasters and all sorts of things that play into it, of course.

And unfortunately, one of them was too close to home for us with the LA wildfires. But natural disaster is also a big component as well as, you know, changes to the lifestyle. You know, whether it's working remotely or growing your family or addressing special needs for household members.

I guess that's just trends in general in society that homeowners need to adapt to if they want to resell or anything like that.

I completely agree. This is a trend that is true for any industry. And anyone trying to stay successful and relevant will need to kind of keep an eye on it.

From a consumer's perspective, are you seeing a trend more towards remodeling over building from scratch, building new homes?

Oh, that's an interesting question, because mostly what my research is covering is residential remodel and renovations for the existing homes. So that would be the primary focus without going into whether they build or not. But again, the number one activity that we are seeing in the industry as a whole is upgrading the existing housing stock.

Okay, okay. Can you talk a little bit more about the motivations? You mentioned them, I think, briefly before, around having the time and price and budget, I think it was to remodel. Can you talk more about those motivations and what you think, why you think they've come more important now?

Of course, I would love to, and I would try to break it down by generation for our listeners and us so that, you know, it makes it a little bit more clear that for younger generations, such as millennials, being having the, you know, prioritizing home is a big component. It's one of the top motivators. They're trying to make sure that the house they bought is truly reflecting what they wanted for themselves. For Gen Xers, it would be trying to bring in the financial means so they are in the stage of their lives where they can have. Where they have multiple priorities so that they are trying to make sure that home improvement is still happening while not hindering any other activities that they might have for their family. And for baby boomers and older generations, the biggest motivator is I finally have the time. I can bring those projects to life because now I have this financial stability and have the time to go and embark on those projects. And all of this fuels the remodeling activity. What it means is that if you are talking to a millennial, you know how to approach them in terms of helping them to personalize their space. If you are discussing the projects with the Gen X, you talk about how to make sure that they are within the budget or are aware of certain costs or cost increases. And for the Baby boomers clearly stating what the project is going to intake and then what the scheduling is going to be like for that.

One thing we've seen, particularly in Australia, and I think it's probably had a similar impact in North America as well, is because mortgage rates have been so high in recent years, new home buyers that are coming into the market for the first time, they may buy a home that needs some work on it and therefore they will look to budget for remodeling rather than buying a home out of the box, which they love. Is that something you see as well?

100%. That's a huge shifter in the industry. Homeowners are not able to find a home for two reasons, actually. One is there is a major shortage of housing stock in the US Nationally. And second of all, the mortgage rates have been so high in the recent couple years that it doesn't allow homeowners to move and find that perfect home that doesn't need a remodel. And you know, this is an interesting shift because I do see that 60% of renovating homeowners tell us that they are planning on staying in their homes for 11 years or longer. Okay, wow, that's a really long time. So it's incredible to see how that also impacts the design and functionality choices that homeowners choose to bring into their homes when they remodel.

Has that grown that 11 years? Because I feel like just in my mind I'm thinking 5, 10 years is probably the maximum. Right?

Exactly. And you have a really good sense of it because back in 10 years ago, that number was one third. So, you know, only 30 something percent of homeowners were saying that they are going to stay that long in their home. Well, it's interesting that you brought it up because in certain regions. So for example, if I were to break down our data into specific cities in the US you'll see that homeowners in Los Angeles or in high demand areas like the Bay Area, you'll see those remodeling homeowners are thinking 20 years to stay in their home. And those shares are growing since 2020. And on the flip side, I do have regions like Austin and Houston where homeowners are saying maybe five years is something that I'm going to see myself live in this remodeled home. And it comes down to really the economic opportunities, what's the lifestyle, what's the economic opportunity there, as well as the housing availability.

I guess if you, if you buy a home in the Bay Area, for example, maybe that's like your forever home that you, you've reached a certain point. Whereas in other areas, maybe it's your first home or you think it's a stepping stone to the next one you might be able to purchase as well.

I completely agree. And you know, for homeowners who locked in those lower rates, it's just really hard to convince them that it makes sense for them to find a new home. And also, you know, from our research, we're seeing that homeowners sometimes really like the location that they are in, especially Gen Xers who are in this stage where they have growing families, maybe they have kids, maybe they have this work and family balance where they have good cadence for where they are. And it's really hard for them to make the decision of moving, especially when they like the location.

I may be wrong here, but I have a feeling rates, locking in rates is different in North America than it is in Australia. For example, fixed rate mortgages in Australia, typically you would have a maximum of around five years on a fixed rate mortgage. It would be a 30 year loan, but you would move to a variable rate after that. But in North America, you lock it in for the entire loan, is that right?

Typically you do lock it in for the entire 30 years. So this is a big.

I wouldn't be moving if I was on a 2% or something like that. Right?

I hear you for sure.

Yeah. That's crazy. Just to go back to how those trends impact pros and how they engage with their customers and things like that, do you think those generational preferences are something which will always be there, or is there certain. Related. Related to the certain times and trends at the time?

Sure. So let me break it down a little bit for the listeners and us to kind of discuss this in various way for right now. We know that the biggest share of renovating homeowners are baby boomers.

Okay.

And Generation X is this next big wave with 32% of the remodeling homeowners being down. But then we also have millennials coming of age and gaining some share in that model. So what, what it ends up being is that current pros, whether they are seasoned or if they are just starting out, they are so much used to having baby boomers or Gen Xers as their clients. It's a little bit of a, a shift for them to also consider millennials as their potential clients. However, I would argue that it's absolute imperative to make sure that we are also positioned in such ways that we are able to assist and engage millennials as well. They are after all, a large cohort, they will be making inroads for being the largest generations to remodel. And the one interesting fact about them would be them being digital natives. So they do extend expect this tech driven aspect everywhere in their lives. You know, they are able to order same day delivery, they are able to book a vacation on their phone at their fingertips and they kind of expect that without thinking about well, what was it like before? You know, for them before was always being able to use technology to get things streamlined. So this is exactly why I in my presentations I always tell the pro community as well as designers then that utilizing technology is not just optional, it's already essential to be able to cater to this new generation that is coming up.

Yeah, that's really important. And I especially for older builders, whether in, you know, if they're older than millennials, at least in Gen X or baby boomers, they need to understand and adapt to understanding what they work like. And technology is a huge part of that. The other part is there might be an opportunity for pros to focus on the millennial market as their niche specialization. Is it big enough to do that?

I think it's never early to start because you never know when they are going to pick and then how really millennials are impacting the decision making in this industry. We are seeing a lot more multigenerational livings when millennials will be living with older generations but being the decision maker in the household. So that's also another consideration. And you know you mentioned for pros to adopt in 2024 report that we have released very recently with House Research, we are seeing that a lot of pros tell us that they already have this technology sitting in their business. It just they need to finally have the time to invest in learning how to use it. So, you know, investing that extra time upskilling your client, your colleagues and your teammates is also something that we are seeing that pros are already doing, but then they potentially going into the future will be doing a lot more frequently.

That's interesting. I've heard from other software providers a similar challenge in terms of adoption of the software once they have it in place. What are Houzz doing to bridge that gap for new pros that are using Houzz Pro?

Right. For Houzz. What I find incredible is that it's an all in one solution. You can really do everything with Houzz. And we do have incredible ways of helping pros to learn in different ways. If it's by reading an article you have that option if you would like to see a demo, we do have multiple options of those as well as a lot of ways of just engaging with our teams, of trying to really make it easy enough for you to be able just to pick it up. And you know, at the end of the day, we do hear what our clients have to say. We do take their feedback to heart and try to build it in such user friendly way to ultimately help their success. Because that's really what Houzz is about for the industry right now.

And I know you mentioned not fair that last year was about the software. So there's been a lot of improvements for sure. Okay, back to the topic at hand, remodeling trends. What are some of the rooms or most popular areas of the home to remodel at the moment?

Yeah. So it's not a secret that kitchen and bathrooms are the stars of the home remodel. Right?

Okay.

But what I really wanted to emphasize and what is really interesting is the fact that these room upgrades come hand in hand with home owner home system upgrades within the homes, such as like electrical, plumbing as well as heating and all of that. So it has been incredible to see that. And this goes back to the point where I mentioned that some of the homes in the US are really old. And if I break down the data by age of the home, you'll see that homes built before 2000 require a widespread spread home system upgrades. Homeowners, whether they tackle their kitchen project or bathroom project, a huge share of them, almost everyone, it's like 80% or more, are also upgrading their systems within those rooms. And if you look at the homes that were built after 2000, the system upgrades shifts from being interior, they go to the outdoor. So then homeowners are upgrading their outdoor spaces as well as outdoor systems. And this can be irrigation security or as simple as lighting. So you know, it really, depending on the age of the home, it really matters what it is that you remodel and where it is that you remodel. And home systems have been a really supplement and complementary project that homeowners are really thinking about as they embark on their kitchen and bathroom remodels.

Do the external remodels add as much value to a home as the internal remodels, like the kitchens and bathrooms?

You know, kitchen and bathrooms are the showstoppers when it comes to it. It's the biggest focal point. But you know, this goes without saying that the curb appeal is another aspect. There was so much interest into the outdoor design trends and we launched Our inaugural report last year, and it clearly shows that homeowners are focusing on their exteriors, on their beautiful lawns, bringing in this really incredible lighting to just make sure that it's a cohesive look with their indoor and outdoor. And my absolute favorite is the exterior door upgrades. When people inject some sort of pop of color into their exterior space, like.

The door or something like that, that's very common.

I do see that a lot.

Okay, okay. Taking a slight shift to the experience of remodeling a home. So I believe you have some research and data around the challenges that homeowners face when they're going through remodeling. I mean, it's a complicated process for pros.

You know, I know everyone from builders to designers, from homeowners, everyone is on the same page about the fact that there is a lot of challenges when it comes to upgrading the home. And, you know, a majority of those challenges come from three things, really. And homeowners tell us that it's really non negotiable for you. Those are building trust, being able to communicate well and have transparency. So those pros who can actually engage the homeowners in a way to build trust, provide financial transparency into the cost as well as the estimates, and then, you know, be able to be really responding to the homeowner's needs, whether it's communication or whether it's just showing up, we'll just separate them and like, they can stand out by that type of attitude and behavior as well as a business plan practice, you know, to kind of bring in some personal note. I did remodel our kitchen couple of years ago. And, you know, those challenges are real. I was just reading about them in my research and, you know, sharing with everyone. But then once it happens to you, it just becomes so much real. And for me, the budget constraints were always top of mind, but. But then what became the most stressful part of it was the uncertainty. I wasn't sure if they'll show up. I wasn't sure if there'll be delays. I didn't know whether there is going to be some sort of a hidden cost or any of that. And, you know, just having a contractor who was very diligent about, you know, understanding what I'm going through and just letting me know that, you know, your cabinet person is coming in at 2pm Be ready for someone who will take out the trash at this other PM Laborers are coming in, the stone people are coming in. Your flooring professional is there for you. To meet them was such an Incredible thing. And it went a long way. And you know, there are a lot of things that can go wrong during construction of nobody's fault. Right. But just having the trustworthy contractor who you can lean into builds this huge trust. Let me give you the statistics. Businesses on our research tell us that 70% or more of their projects is coming from word of mouth and repeat clients. That's incredible number to me. So being able to build that trust from the get go and deliver the product and then complete this job in meaningful way and where you part ways in very pleasant terms goes a long way. And you can do all of those things with already existing technology by being really open to the client needs as well.

This might be a sidetrack, so I won't go into this topic, but the topic of relying on referrals and word of mouth is something the data recommends that you don't do. Because statistically building companies that don't rely as heavily on referrals because they have, you know, paid marketing and everything like that they do are more profitable. So because they're getting more interest in. But I mean that's not to say that it's not important to build trust and all of that kind of stuff.

That's so interesting you said that. And then, you know, businesses do all of those things. They have paid marketing, they reach out to their existing clients, but then also engage new clients. But a lot of times they find themselves in a situation with either a client comes back or they nudge someone too. But then, you know, building back to the generations that were discussed. That might have been really true about baby boomers and Gen Xers reaching out their friends, families or communities. But not might not be so true about millennials when they come because of the larger share of the remodeling market. So it's always good to diversify to make sure that you are relevant to the newer generation as well.

Yeah, I think you just need a multi channel approach so you're protecting your business. So if there is a downfall in referrals, then you've got other opportunities as well.

Of course, 100%. And it's true about any other industry out there. If you are a business and diversification is number, number one key, what else.

Can builders or pros change to better engage with that new generation coming?

You know, going back to the point where being open to their client needs leveraging technology to be able to address a lot of the challenges, to be able to streamline some of the operations so that it's not, you know, hindering any of their work, being able to communicate with their team members as well, to make sure that nothing is falling through the cracks. And you know, and finally just trying to be mindful of how much homeowners are investing in their homes and that that might be one of the biggest ticket items in their lifetime after purchasing that home.

Yeah, of course. Great, Great advice. Where do you see this going in the next 12 to 18 months? Do you see. What trends do you see coming out from the remodeling space?

So let me tell you what businesses tell me, and then I'll tell you what design trends I'm seeing on our end, and then I'll wrap it up there, because my personal take, I don't know if it matters that much, but I'm just kidding. So what businesses tell us is they are so optimistic about 2025, and we already talked about that offline, they are letting us know that they are expecting 2025 to be an incredible year. They are expecting huge, huge growth in their revenues. Some of them are telling us that demand has been so resilient, and they know they're going to be able to secure projects. Some of our quarterly data that is really tracking the business activity is also pointing to a similar direction. So in the next couple months, businesses are really expecting the business activity to pick up, especially compared to quarter four of 2024. On the design side, what we are seeing, you know, in interest of time, I'm just going to kind of give you the three top things that I see in both kitchen and bathroom remodels. So one of them will be homeowners do bring pop of colors, really bold colors, into both their kitchens and bathrooms. And these colors are typically green or blue.

Okay.

It's interesting to see you mentioned exterior doors as a pop of color. And the red would be the choice of that contrast that homeowners bring into into their homes. For the bathroom and kitchen remodels, we are seeing a lot of mix and matching, and people do that with styles, textures, as well as materials, and that kind of gives a very unique look and personalized look into their bathrooms and kitchens. And finally, what we are seeing is that homeowners are upgrading their homes for the future. They are addressing whatever they currently need, but then they are also prioritizing their future needs as well, because it can be as simple as accessibility issues that they anticipate to arise sometime in next five years. So they are really making sure that they are, with these renovations, they are not only addressing the current needs, but also the future needs.

Interesting. Are you saying is where's energy efficiency fall into this priority list?

So sustainability is a huge component of design for kitchens and bathrooms. And you know what was incredible for me to see is that how cost effectiveness of the energy efficiency as well as the durability of some of the energy efficient items in your household can align perfectly with with a bigger picture of, you know, climate and environmental factors. So being able to align those things, it does come out in our kitchen and bathroom studies as well. Energy efficient appliances are a big hit when homeowners are installing new appliances into their kitchens after the remodels and water efficient faucets and appliances for the bathroom is another big hit for homeowners when they are upgrading their bathrooms.

Cool. Well, thanks for sharing all those trends today. Marnee.

Oh, thank you so much for having me. You know, it's a pleasure for me to chat and get, I love, I.

Feel like we were just having this intent, personal conversation the whole time. So it was really enjoyable for me. And you've got so many great insights to share. So thank you for coming on the show today.

Thank you so much for having me here. Really truly appreciate it.

And for everyone at home listening, listening on check out House Pro. Of course, we'll put a link in the in the show notes.

That sounds great. Thank you.

Great. Well, good luck for your presentation this afternoon.

Thank you so much. Appreciate you saying that. And good luck with the secrets of the builders.

Yeah, thank you.