Every quarter, we share insights from the Houzz Renovation Barometer to help you stay abreast of industry trends and make better business decisions. The Barometer provides insights on business expectations, project backlogs and recent activity among businesses in the U.S. construction and architectural and design services sectors, related to residential projects. Here are the findings for the beginning of the first quarter of 2025, including data based on Q4 2024 results, specifically for two groups of construction professionals: design-build firms and build-only firms.
Most Positive Outlook in 2½ Years
“Strong Q4 performance and recent federal interest rate cuts have bolstered confidence among industry professionals as we enter the new year,” Houzz staff economist Marine Sargsyan says. “With this solid foundation, construction firms are expressing the most positive sentiment we’ve seen for the sector in two and a half years.”
Specifically, in early Q1 2025, the Expected Business Activity Indicator for construction businesses related to project inquiries and new committed projects increased by 3 points, to 65 — the highest score since Q3 2022. (A score greater than 50 points indicates that more businesses expect quarter-over-quarter increases rather than decreases in business activity.) Both build-only and design-build remodelers expect an uptick in Q1 2025 business activity, with the indicators at 65 and 66, respectively, versus 62 and 61, respectively, forQ4 2024.
Factoring In Potential Tariff Hikes
Tariffs, which are taxes on imported goods and services, aren’t new, but concern exists that they may soon rise, in other words - be imposed on products and materials used in construction at a higher rate. Higher tariffs would mean higher overall costs, which building pros would have to either absorb or pass on to clients. Over time, high tariffs can slow growth, reshape market strategies and influence broader economic sentiment as businesses adapt to more expensive raw materials.
Potential tariff changes may help account for why 76% of building pros cited being uncertain about the economy as a concern.
Many imported goods — such as wood, steel, aluminum and appliances — already are subject to antidumping and countervailing duties, which affects supply chain costs and strategic planning for construction businesses. And more than half of construction firms (54%) already are concerned about the budget constraints their clients face.
Takeaway: Businesses may need to strategize about ways to stay afloat if tariffs increase, ensuring that higher costs don’t deter clients from moving forward with their projects.
Recent Business Activity Rises
The Recent Business Activity Indicator related to project inquiries and new committed projects for the construction industry as a whole increased by 7 points between Q3 2024 and Q4 2024, landing at 54. (A score greater than 50 points indicates that more businesses saw quarter-over-quarter increases rather than decreases in business activity.)
This higher score was driven by a 14-point increase in project inquiries, to 60, in Q4, The figure for new committed projects remains stable, at 48. Both build-only pros and design-build firms reported a 7-point increase in recent business activity, bringing the indicator for each above 50 points (53 for build-only pros and 55 for design-build firms).
To recap 2024 findings, the Recent Business Activity Indicator for the construction industry as a whole briefly landed above the 50-point mark in Q2 (a score of 52), signaling stronger performance compared to Q1 (45). In Q3 the indicator was still below 50 (47), but in Q4, as mentioned above, it once again rose above the 50-point mark (54).
Project Backlog Times Shorten
At the beginning of Q1 2025, the Project Backlog Indicator for the construction industry as a whole is substantially lower than it was in Q4 2024 (5.8 weeks versus 10.5 weeks, respectively); year over year, construction pros overall saw a 0.9-week decrease. Breaking it down by sector: For build-only remodelers, backlog times decreased by 1.4 weeks, to 5.0 weeks, quarter over quarter, while design-build pros saw a 0.4-week decrease, to 6.7 weeks, quarter over quarter.
However, it’s important to note that wait times for project kickoffs vary significantly from region to region of the United States. The Mountain region (Arizona, New Mexico, Wyoming, Nevada, Colorado, Utah, Idaho and Montana) and South Atlantic region (Delaware, Georgia, Florida, South Carolina, Maryland, North Carolina, West Virginia, District of Columbia and Virginia) have the shortest average wait time, 4.1 weeks. The New England division (Maine, Massachusetts, Connecticut, New Hampshire, Rhode Island and Vermont) has the longest, 9.1 weeks.
More
Read more about the Q1 2025 Renovation Barometer for the construction industry
Want advice delivered to your inbox?
Unlock industry insights and updates for contractors and design pros
By signing up, I agree to the Houzz Terms of Use and Privacy Policy and that Houzz may use my information to contact me about relevant content, products, and services.
