Competition rises as home remodeling goes digital

Building Houzz brick by digital brick: CEO
Building Houzz brick by digital brick   

Your home may be your castle, but that doesn't mean the turrets can't be enlarged, the drawbridge painted a more inviting shade, or the moat redirected to improve curb appeal.

A slew of new home renovation websites are counting on just that, causing the space to become increasingly competitive, as the already $300 billion remodeling industry begins a new boom.

Houzz, Porch, HGTV, DIY Network, Dwell, Remodelaholic—architects, design-build firms, contractors, product manufactures, even plumbers and electricians increasingly say they must be on these sites just to compete in the home remodeling field.

"Most of us got into this remodeling business because we love the smell of sawdust, we love design, we're passionate about homes. Now we have to be experts in social media and all these other platforms," said Bruce Case, president of Case Design/Remodeling, a Bethesda, Maryland-based firm. "There's a benefit to that, but the bottom line is, it is an added cost."

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A cost that is reaping big rewards for Porch, a Seattle-based company that launched in late 2013 and last year began offering its "Home Report." The free product gives consumers historical data on homes they may be looking to buy or renovate. A new app from Porch also allows homeowners to connect with local professionals in seconds.

A home improvement contractor works on a house in Cambridge, Massachusetts.
Suzanne Kreiter | The Boston Globe | Getty Images
A home improvement contractor works on a house in Cambridge, Massachusetts.

"At this point we have 130 million projects that we know about people's homes from across the country from our 3.2 million professionals," said Matt Ehrlichman, CEO of Porch, which has grown its staff nearly sixfold since its launch and is now moving into a huge new space. "If you're buying a home, who wouldn't want to see if there was a new roof that was put on or how much they spent on the remodel, so we're able to use our data to tell them the story of the home that nobody else can."

That enormous cache of data has allowed Porch to partner with major companies, including Lowes and Realtor.com, to help consumers find home improvement professionals. Ehrlichman said the firm has raised $100 million to date and is "well-capitalized." It is not, however, without big competition, especially from Houzz, a Palo Alto, California-based company. (The investment arm of Comcast, CNBC's parent company, owns a stake in Houzz.)

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Houzz started as a website for consumers to look at other renovations and create idea books of products and designs; now it's not only selling those products, it's helping homeowners connect with remodeling professionals, as well. It has become an online remodeling marketplace valued, in recent reports, at over $2 billion.

"I think that the fact that the vendors were there, the manufacturers were there, as well as the home owners.... They really wanted Houzz to become the place where they do everything, from the inspiration to finding the professionals, interacting with the community, all the way to getting everything they need," Adi Tatarko, CEO of Houzz, told CNBC.

Residential remodeling has been improving steadily, although it dipped slightly last year, when home sales weakened. That's because people tend to remodel homes they've just purchased. Now, as home sales gain as consumers start to feel more confident about the overall value of their homes, remodeling should benefit.

"Moving forward, signs of higher growth in remodeling activity include strengthening retail sales of building materials," said Abbe Will, a research analyst in the Remodeling Futures Program at the Harvard Joint Center for Housing. "Also, rising home equity and still favorable interest rates continue to encourage owners to reinvest in their homes."

Stephen Gately and his wife, Elizabeth, used to flip through stacks of magazines. But when they were recently brainstorming an addition to their Washington, D.C., home, they turned to Houzz. They were able to coordinate with their design-build firm, Case, through the Houzz site, when it came to picking fixtures and products.

"For us, it's made it a much easier, simpler, faster process. It's allowed us to find things, the look and feel, without having to scratch our heads and figure out where to go," Stephen Gately said.

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Of course, going digital has a downside for businesses, as well. Case said his firm has gotten some negative reviews on consumer rating site Yelp, but said that's be expected with any business. And he values the transparency, he said.

As consumers become increasingly comfortable with the websites, they come to expect the good and the bad. In the end, simplifying what is often the most frustrating and emotional investment one can make is paramount.

"I have several magazines in the house that I'm like, I think I can get rid of these now," laughed Stephen Gately.