Industry Research
After Declines in 2024, Building and Design Firms Expect Growth
Despite headwinds, industry professionals are optimistic, the 2025 U.S. Houzz State of the Industry report finds
Residential construction and design professionals have an optimistic outlook for 2025, with more than 3 in 5 firms reporting positive expectations for overall business performance, according to the just-released 2025 U.S. Houzz State of the Industry report. Businesses across industry sectors anticipate high revenue growth rates, heightened demand for their services and improved local and national economies, even as they brace for rising costs and worsening labor shortages. This widespread optimism follows a year marked by unexpected revenue and profitability declines industrywide.
“Home professionals are entering 2025 with renewed confidence and expectations for growth in both revenue and profitability after navigating two difficult years,” Houzz staff economist Marine Sargsyan says. “Pros report that they’ve implemented new processes for operational efficiency and client communication and made strategic investments in technology to address the challenges they faced last year. This will better position them for an anticipated increase in demand, enhance their resilience amidst potential tariffs and leverage expected improvements in both local and national economic conditions.”
Here’s what the report reveals about firms’ expectations for 2025 and performances in 2024.
“Home professionals are entering 2025 with renewed confidence and expectations for growth in both revenue and profitability after navigating two difficult years,” Houzz staff economist Marine Sargsyan says. “Pros report that they’ve implemented new processes for operational efficiency and client communication and made strategic investments in technology to address the challenges they faced last year. This will better position them for an anticipated increase in demand, enhance their resilience amidst potential tariffs and leverage expected improvements in both local and national economic conditions.”
Here’s what the report reveals about firms’ expectations for 2025 and performances in 2024.
Overall outlook is positive. Firms across the residential construction and design sectors are generally bullish on business for 2025. Specialty contractors are the most optimistic, with nearly three-quarters (73%) reporting having a good or very good business outlook for the year. Sentiment is also positive among the majority of interior designers (70%), design-build firms (68%), general contractors (61%) and architects (60%).
Revenue and profits expected to increase. Consistent with that generally optimistic outlook, firms across all seven industry groups have positive expectations for revenue and profits in 2025.
For example, 70% of interior designers anticipate an increase in revenue, and nearly as many (68%) expect an uptick in profits.
Among construction businesses, 72% of specialty contractors expect increased revenue and 64% expect a boost in profits.
For example, 70% of interior designers anticipate an increase in revenue, and nearly as many (68%) expect an uptick in profits.
Among construction businesses, 72% of specialty contractors expect increased revenue and 64% expect a boost in profits.
Revenue growth estimates increase. Firms in both the construction and design sectors anticipate higher average annual rates of revenue growth in 2025 than they did at the beginning of 2024.
Specialty contractors and general contractors are most optimistic for 2025, expecting double-digit revenue growth (average growth of 12.4% and 11.3%, respectively).
Architects, design-build firms, interior designers and landscaping and outdoor service firms also expect high growth rates this year, ranging from 9% to 9.4%.
Specialty interior service firms were the only group reporting slightly lower growth expectations (7.1% for 2025 compared with 8.2% for 2024).
Specialty contractors and general contractors are most optimistic for 2025, expecting double-digit revenue growth (average growth of 12.4% and 11.3%, respectively).
Architects, design-build firms, interior designers and landscaping and outdoor service firms also expect high growth rates this year, ranging from 9% to 9.4%.
Specialty interior service firms were the only group reporting slightly lower growth expectations (7.1% for 2025 compared with 8.2% for 2024).
Demand for services projected to increase. More than half of businesses (51% to 77%) in all seven surveyed groups expect heightened demand for their services in 2025.
Businesses that provide specialty interior services are particularly confident, with 77% expecting greater demand. Architects (67%) and interior designers (58%) are also optimistic. In the construction sector, design-build firms are the most confident (62%), followed by general contractors (57%) and specialty contractors (52%).
More firms in both the construction and design sectors expect improvements in the national economy (37% to 57%) and their local economies (38% to 50%) than expect declines. These percentages are significantly higher than they were in 2024, when 17% to 34% of businesses anticipated improvements to the national economy and 25% to 38% expected improvements in their local economies.
Businesses that provide specialty interior services are particularly confident, with 77% expecting greater demand. Architects (67%) and interior designers (58%) are also optimistic. In the construction sector, design-build firms are the most confident (62%), followed by general contractors (57%) and specialty contractors (52%).
More firms in both the construction and design sectors expect improvements in the national economy (37% to 57%) and their local economies (38% to 50%) than expect declines. These percentages are significantly higher than they were in 2024, when 17% to 34% of businesses anticipated improvements to the national economy and 25% to 38% expected improvements in their local economies.
Labor availability expected to worsen, costs expected to rise. Labor shortages remain a problem. More firms in six of the seven reporting groups predict that labor availability will worsen rather than improve in 2025. Among the remaining group — specialty interior service firms — equal shares (17% each) expect more and less labor availability.
Expectations for labor costs are similarly pessimistic, with more than half (51% to 57%) of six of the seven reporting groups bracing for increases. Again, specialty interior design firms deviated from the other six groups, with fewer than half (48%) expecting labor costs to rise.
Expectations for labor costs are similarly pessimistic, with more than half (51% to 57%) of six of the seven reporting groups bracing for increases. Again, specialty interior design firms deviated from the other six groups, with fewer than half (48%) expecting labor costs to rise.
Product and material availability expected to remain stable, costs expected to rise. The majority of firms expect the availability of products and materials to remain largely unchanged in 2025 compared with 2024. At the same time, more businesses expect costs to rise than expect them to decrease.
That sentiment is most prevalent among interior designers and specialty interior service firms, with 59% of both groups reporting that they expect product and material costs to increase.
Construction businesses are similarly pessimistic, with 58% of general contractors, 56% of design-build firms and 56% of specialty contractors anticipating worsening costs.
That sentiment is most prevalent among interior designers and specialty interior service firms, with 59% of both groups reporting that they expect product and material costs to increase.
Construction businesses are similarly pessimistic, with 58% of general contractors, 56% of design-build firms and 56% of specialty contractors anticipating worsening costs.
Review of 2024
Revenue growth dipped. In 2024, businesses across all seven industry groups reported the biggest year-over-year dip in average annual revenue growth since 2014.
Average annual revenue growth for specialty interior service firms dropped by 7.2% — the most significant reduction among the reporting groups. Interior designers experienced a 4.1% reduction and architects a 2.4% reduction. General contractors reported the smallest dip, at 0.3%.
Revenue growth dipped. In 2024, businesses across all seven industry groups reported the biggest year-over-year dip in average annual revenue growth since 2014.
Average annual revenue growth for specialty interior service firms dropped by 7.2% — the most significant reduction among the reporting groups. Interior designers experienced a 4.1% reduction and architects a 2.4% reduction. General contractors reported the smallest dip, at 0.3%.
Profits declined for many. In 2024, across the seven industry groups, 44% to 60% reported profit decreases, while a smaller share (23% to 31%) reported increases.
The 2024 decline in profits was most widespread among landscaping and outdoor service firms, with 3 in 5 (60%) reporting a decrease. Specialty interior service firms follow closely, with 56% reporting a profit decrease in 2024.
Comparing profit decreases year over year, a greater share across all seven groups reported annual profit decreases in 2024 than in 2023, when decreases ranged from 23% to 39%.
The 2024 decline in profits was most widespread among landscaping and outdoor service firms, with 3 in 5 (60%) reporting a decrease. Specialty interior service firms follow closely, with 56% reporting a profit decrease in 2024.
Comparing profit decreases year over year, a greater share across all seven groups reported annual profit decreases in 2024 than in 2023, when decreases ranged from 23% to 39%.
Business costs increased. The majority (65% to 84%) of firms in each industry group reported an increase in the cost of doing business in 2024 compared with 2023.
Landscaping and outdoor service firms were the group with the greatest percentage (84%) of firms reporting higher costs.
Design-build firms were also affected, with 81% seeing increases, followed by 79% of specialty contractors and 77% of general contractors. Meanwhile, 67% of interior designers and 65% of architects also reported higher costs.
Landscaping and outdoor service firms were the group with the greatest percentage (84%) of firms reporting higher costs.
Design-build firms were also affected, with 81% seeing increases, followed by 79% of specialty contractors and 77% of general contractors. Meanwhile, 67% of interior designers and 65% of architects also reported higher costs.
Materials and labor drove costs up. The majority (58% to 75%) of residential construction and design firms — all business groups except architects — attributed the rising cost of doing business in 2024 primarily to product and material price increases. Software costs were the top driver for architects.
Additional factors contributing to cost increases included employee wages or benefits, business insurance and subcontractor costs.
Additional factors contributing to cost increases included employee wages or benefits, business insurance and subcontractor costs.
Rising prices and finding customers posed challenges. Construction professionals and landscaping and outdoor service firms identified the increased cost of doing business as their top challenge in 2024, followed by finding clients. Architects, interior designers and specialty interior service firms, on the other hand, struggled primarily with finding prospective customers.
Software is key to business. Nearly all surveyed businesses used software to manage operations, engage clients, automate workflows, facilitate payments and enhance brand visibility in 2024. For example, 84% of architects, 57% of design-build firms, 58% of interior designers and 51% of landscaping and outdoor service firms used drafting and rendering software. Within the construction sector, 38% of design-build firms, 37% of specialty contractors and 33% of general contractors routinely used software for cost and bid estimation. Businesses also depended on software for billing and invoicing, marketing, CRM, employee time tracking and website building.
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The complete 2025 U.S. Houzz State of the Industry report can be found here.
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The study, which is done annually, represents the views of professionals in seven industry groups: architects, interior designers, general contractors (such as construction-only builders and remodelers), design-build firms, specialty contractors (including replacement contractors, such as carpenters, as well as product installers, manufacturers and resellers), landscape and outdoor service firms (including landscape architects, designers and contractors, as well as outdoor product installers, manufacturers and resellers) and specialty interior service firms (interior decorators and providers of decorating-related products or services).