Industry Research
Home Firms’ Optimism Wanes After Mixed First-Quarter Performance
Building and design professionals have tempered business expectations, the Q2 2025 U.S. Houzz Renovation Barometer shows
After kicking off 2025 feeling bullish, construction and design professionals have tempered their optimism about business activity in the second quarter of the year. This follows a significant dip in Q1 performance among construction firms and relatively stable performance among design firms.
Those are key findings in the just-released Q2 2025 U.S. Houzz Renovation Barometer, which provides timely insights into the residential renovation industry, including expectations, project backlogs and recent activity among businesses in the construction sector and the architectural and design services sector.
“Optimism continues, yet residential construction and design businesses are moderating expectations amid mixed Q1 activity and economic uncertainty,” Houzz staff economist Marine Sargsyan says. “This tempered outlook is unsurprising, as firms continue to navigate challenges including rising material costs, cautious client spending and persistent labor shortages. In response, many firms are proactively adjusting procurement strategies and selectively stockpiling materials in preparation for anticipated tariff-driven price hikes, especially on lumber, steel and cabinetry.”
Those are key findings in the just-released Q2 2025 U.S. Houzz Renovation Barometer, which provides timely insights into the residential renovation industry, including expectations, project backlogs and recent activity among businesses in the construction sector and the architectural and design services sector.
“Optimism continues, yet residential construction and design businesses are moderating expectations amid mixed Q1 activity and economic uncertainty,” Houzz staff economist Marine Sargsyan says. “This tempered outlook is unsurprising, as firms continue to navigate challenges including rising material costs, cautious client spending and persistent labor shortages. In response, many firms are proactively adjusting procurement strategies and selectively stockpiling materials in preparation for anticipated tariff-driven price hikes, especially on lumber, steel and cabinetry.”
A score higher than 50 indicates that more firms reported an increase in their business expectations than reported a decrease.
Construction Firms
1. Business activity outlook decreased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, decreased 6 points, to 59, for the second quarter of 2025 (from 65 for Q1 2025). This was largely driven by a 12-point decline in expectations for project inquiries in Q2, to 57 (from 69 for Q1). Expectations for new committed projects dipped 1 point, to 61 (from 62 for Q1).
More construction firms overall anticipate a quarter-over-quarter increase in business activity than anticipate a decrease in Q2. Looking at it by reporting group, however, expectations diverge. Build-only professionals expect an uptick in activity, with a 3-point increase, to 68 (from 65 for Q1). Expectations among design-build firms, in contrast, decreased a significant 17 points, to 49 (from 66 for Q1). This decline brings the expected business activity indicator below the 50-point mark for design-build firms, indicating that more businesses expect quarter-over-quarter decreases than expect increases in business activity.
The indicator is based on survey questions about whether businesses expect the number of project inquiries and new committed projects to increase, decrease or remain unchanged in the coming three months compared with the previous three months.
Read how professionals expect market shifts, such as tariffs and interest rates, to impact their business and the industry
Construction Firms
1. Business activity outlook decreased. The Expected Business Activity Indicator, related to project inquiries and new committed projects, decreased 6 points, to 59, for the second quarter of 2025 (from 65 for Q1 2025). This was largely driven by a 12-point decline in expectations for project inquiries in Q2, to 57 (from 69 for Q1). Expectations for new committed projects dipped 1 point, to 61 (from 62 for Q1).
More construction firms overall anticipate a quarter-over-quarter increase in business activity than anticipate a decrease in Q2. Looking at it by reporting group, however, expectations diverge. Build-only professionals expect an uptick in activity, with a 3-point increase, to 68 (from 65 for Q1). Expectations among design-build firms, in contrast, decreased a significant 17 points, to 49 (from 66 for Q1). This decline brings the expected business activity indicator below the 50-point mark for design-build firms, indicating that more businesses expect quarter-over-quarter decreases than expect increases in business activity.
The indicator is based on survey questions about whether businesses expect the number of project inquiries and new committed projects to increase, decrease or remain unchanged in the coming three months compared with the previous three months.
Read how professionals expect market shifts, such as tariffs and interest rates, to impact their business and the industry
2. Project backlogs are similar to last year’s. At the start of Q2 2025, the average backlog across the construction sector was 6.4 weeks nationally. That’s consistent with the backlog in for the second quarter of 2024, when it was 0.1 week longer, at 6.5 weeks.
Looking at it by reporting group, the average wait times are 4.8 weeks for build-only firms (2 weeks shorter than a year ago, when it was 6.8 weeks) and 8 weeks for design-build firms (1.8 weeks longer than a year ago, when it was 6.2 weeks).
The Project Backlog Indicator is based on survey questions that ask businesses to report wait times (in weeks) to start work on a midsize project. Scores are computed as average wait times without seasonal adjustment.
Looking at it by reporting group, the average wait times are 4.8 weeks for build-only firms (2 weeks shorter than a year ago, when it was 6.8 weeks) and 8 weeks for design-build firms (1.8 weeks longer than a year ago, when it was 6.2 weeks).
The Project Backlog Indicator is based on survey questions that ask businesses to report wait times (in weeks) to start work on a midsize project. Scores are computed as average wait times without seasonal adjustment.
Geographically, backlogs for the construction sector vary significantly, from 11.8 weeks in the New England division (Maine, Massachusetts, Connecticut, New Hampshire, Rhode Island and Vermont) to 3.5 weeks in the West South Central division (Oklahoma, Texas, Arkansas and Louisiana).
A score lower than 50 indicates that more firms reported a decrease in their recent business activity than reported an increase.
3. Recent business activity decreased. The Recent Business Activity Indicator, which is related to project inquiries and new committed projects, decreased 12 points, to 42, for the construction sector in Q1 2025 (from 54 in Q4 2024), dipping below the 50-point line and indicating slowdowns in Q1 business activity compared with Q4 2024. This was driven by an 18-point decrease in project inquiries, to 42 (from 60 in Q4), and a 5-point drop in new committed projects, to 43 (from 48 in Q4).
More businesses in each reporting group experienced a decline in business activity than experienced improvements. Design-build firms reported a 9-point decrease in recent business activity in Q1, to 46 (from 55 in Q4). Build-only firms saw a 14-point decrease, to 39 (from 53 in Q4).
The Recent Business Activity Indicator looks at actual activity over the previous three months. In contrast with the Expected Business Activity and Project Backlog indicators, which look forward in time, the Recent Business Activity Indicator looks back. It’s based on survey questions about whether businesses observed an increase, a decrease or no change in the actual number of project inquiries and new committed projects over the previous three months relative to the three months prior.
3. Recent business activity decreased. The Recent Business Activity Indicator, which is related to project inquiries and new committed projects, decreased 12 points, to 42, for the construction sector in Q1 2025 (from 54 in Q4 2024), dipping below the 50-point line and indicating slowdowns in Q1 business activity compared with Q4 2024. This was driven by an 18-point decrease in project inquiries, to 42 (from 60 in Q4), and a 5-point drop in new committed projects, to 43 (from 48 in Q4).
More businesses in each reporting group experienced a decline in business activity than experienced improvements. Design-build firms reported a 9-point decrease in recent business activity in Q1, to 46 (from 55 in Q4). Build-only firms saw a 14-point decrease, to 39 (from 53 in Q4).
The Recent Business Activity Indicator looks at actual activity over the previous three months. In contrast with the Expected Business Activity and Project Backlog indicators, which look forward in time, the Recent Business Activity Indicator looks back. It’s based on survey questions about whether businesses observed an increase, a decrease or no change in the actual number of project inquiries and new committed projects over the previous three months relative to the three months prior.
A score higher than 50 indicates that more firms reported an increase in their business expectations than reported a decrease.
Architectural and Design Firms
1. Business activity expectations decreased. In the architectural and design services sector, the Expected Business Activity Indicator remained above the 50-point line in Q2 2025, but it decreased by 6 points, to 62 (from 68 for Q1). This was driven by a 4-point decrease in expectations for project inquiries, to 62 (from 66 for Q1), and a 7-point drop in expectations for committed projects, also to 62 (from 69 for Q1).
Taking a closer look, the indicators dipped for both reporting groups in Q2. Architects’ expectations dropped 6 points, to 59 (from 65 for Q1), and interior designers’ expectations dropped 5 points, to 67 (from 72 for Q1). Still, more businesses in both groups expect an improvement in business activity in Q2 than expect a decline.
Architectural and Design Firms
1. Business activity expectations decreased. In the architectural and design services sector, the Expected Business Activity Indicator remained above the 50-point line in Q2 2025, but it decreased by 6 points, to 62 (from 68 for Q1). This was driven by a 4-point decrease in expectations for project inquiries, to 62 (from 66 for Q1), and a 7-point drop in expectations for committed projects, also to 62 (from 69 for Q1).
Taking a closer look, the indicators dipped for both reporting groups in Q2. Architects’ expectations dropped 6 points, to 59 (from 65 for Q1), and interior designers’ expectations dropped 5 points, to 67 (from 72 for Q1). Still, more businesses in both groups expect an improvement in business activity in Q2 than expect a decline.
2. Project backlogs are similar to last year’s. Architectural and design service firms have seen a minimal increase in wait times. The Project Backlog Indicator was 5.7 weeks at the beginning of Q2 — consistent with the average wait time a year ago, when it was 5.6 weeks.
Both architects and interior designers reported a 0.1-week increase in wait times compared with Q2 2024, when their backlogs were 6.2 weeks and 4.7 weeks, respectively.
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Both architects and interior designers reported a 0.1-week increase in wait times compared with Q2 2024, when their backlogs were 6.2 weeks and 4.7 weeks, respectively.
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Backlogs in the architectural and design services sector also vary widely by region.
Businesses in the Mountain division (Arizona, New Mexico, Wyoming, Nevada, Colorado, Utah, Idaho and Montana) reported the shortest average backlog, at 4.3 weeks. The East South Central division (Alabama, Tennessee, Kentucky and Mississippi) reported the longest backlog, at 6.5 weeks.
Businesses in the Mountain division (Arizona, New Mexico, Wyoming, Nevada, Colorado, Utah, Idaho and Montana) reported the shortest average backlog, at 4.3 weeks. The East South Central division (Alabama, Tennessee, Kentucky and Mississippi) reported the longest backlog, at 6.5 weeks.
A score higher than 50 indicates that more firms reported an increase in their recent business activity than reported a decrease.
3. Recent business activity increased slightly. The Recent Business Activity Indicator related to project inquiries and new committed projects for the architectural and design services sector increased 1 point, to 59, in Q1 2025, from 58 in Q4 2024. This is attributed to a 1-point uptick in both recent project inquiries, to 57 (from 56 in Q4), and new committed projects, to 60 (from 59 in Q4).
The Recent Business Activity Indicator was down 2 points, to 59, for architects in Q1 2025 (from 61 in Q4). For interior designers, it was up 5 points, to 58 (from 53 in Q4). Despite the minor decline reported by architects, the overall indicator is above the 50-point line, suggesting widespread improvements in business activity in Q1 compared with Q4.
3. Recent business activity increased slightly. The Recent Business Activity Indicator related to project inquiries and new committed projects for the architectural and design services sector increased 1 point, to 59, in Q1 2025, from 58 in Q4 2024. This is attributed to a 1-point uptick in both recent project inquiries, to 57 (from 56 in Q4), and new committed projects, to 60 (from 59 in Q4).
The Recent Business Activity Indicator was down 2 points, to 59, for architects in Q1 2025 (from 61 in Q4). For interior designers, it was up 5 points, to 58 (from 53 in Q4). Despite the minor decline reported by architects, the overall indicator is above the 50-point line, suggesting widespread improvements in business activity in Q1 compared with Q4.
The Houzz Renovation Barometer is based on a quarterly online survey sent to a national panel of U.S. businesses with online profiles on Houzz. If you’re a pro and would like to offer your insights on market conditions in your area by joining the Barometer panel, please click here.
Read more on this and past Barometer reports (including more detailed regional and subsector data).
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Read more on this and past Barometer reports (including more detailed regional and subsector data).
Tell us: How does this report compare with your experiences? Please share in the Comments.
More for Pros on Houzz
Read more stories for pros
Learn about Houzz Pro software
Talk with your peers in pro-to-pro discussions
Join the Houzz Trade Program
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