News Summary
The latest Q3 Houzz U.S. Renovation Barometer reveals a continued decline in optimism among construction and design professionals. Economic challenges including rising costs and potential tariffs create a cautious outlook for the upcoming quarter. Business activity indicators show a downturn in project inquiries and new engagements, while concerns about labor shortages and market shifts heighten among industry professionals. Despite the challenges, some firms remain hopeful about performance improvement. The data reflects a pressing need for both sectors to adapt to evolving economic conditions.
Construction and Design Sectors Show Continued Decline in Optimism
The recent Q3 2025 Houzz U.S. Renovation Barometer, released on July 23, 2025, indicates a further decline in optimism within the construction and architectural/design sectors. This marks the second quarter in a row where business sentiment has decreased, leading to a growing sense of unease among professionals due to ongoing economic uncertainties.
Declining Business Sentiment
Business outlook has taken a significant hit since the beginning of 2025. Although many industry professionals remain hopeful for improvements in the upcoming quarter, the reality of current market conditions continues to weigh heavily on their expectations. Economic challenges, including rising costs, potential tariffs, and inflation, are contributing to the cautious tone observed across the industry.
Key Findings from the Report
The Expected Business Activity Indicator for construction businesses has dropped slightly from 59 in Q2 to 58 in Q3 2025. More notably, expectations for new committed projects saw a substantial decline of 9 points. However, there is a small glimmer of positivity, as project inquiry expectations have risen by 7 points, now resting at 64 for Q3.
Looking at specific segments, both build-only remodelers and design-build firms report expectations of improved business activity, each with an indicator standing at 58 points. Meanwhile, the Project Backlog Indicator has decreased to 6.1 weeks, which is 1.5 weeks shorter than the same time last year.
Recent Trends in Business Activity
Unfortunately, the Recent Business Activity Indicator has fallen sharply to 38 from 42 in Q2, primarily due to an 8-point decrease in new committed projects, bringing that figure down to 34. On a more stable note, project inquiries have remained unchanged at 42 points, but overall business activity is now below the neutral 50-point line, indicating that more businesses are reporting declines than improvements.
Challenges Facing the Industry
Industry professionals are grappling with numerous challenges, including increased product and material costs (45%), rising labor costs (32%), and the struggle to maintain profit margins (26%). In the design sector, the Expected Business Activity Indicator has also decreased to 58 for Q3 2025, down 4 points from Q2. The declines reflect similar drops in expectations for project inquiries and new committed projects, both reported at 58 points.
For architects, the reported indicator has decreased to 57 points, while interior designers are at 59 points. Interestingly, more businesses in the design sector anticipate improved activity levels in Q3 compared to Q2.
Backlogs in Projects
The Project Backlog Indicator for design services stands at 5.9 weeks, slightly longer than the previous year’s figures. Yet, architects reported a decrease in backlog to 6.7 weeks, while interior designers experienced an increase of 1.5 weeks, reaching a total backlog of 4.4 weeks. The Recent Business Activity Indicator for the design sector has also decreased to 45 due to declines in both project inquiries and new commitments.
Looking Ahead
A significant 93% of residential construction professionals and 94% of design professionals express concerns that market shifts will negatively affect their business in the upcoming quarter. The economic factors causing concern include tariffs, which worry 48% of construction professionals and 59% of design professionals, as well as inflation, noted by 42% of construction pros and 46% of designers.
Labor shortages are also set to persist, with expectations of moderate to severe shortages, particularly in areas like general laborers and finish carpenters. Our understanding of tariffs affecting vital materials such as lumber and plywood raises alarm for 66% of construction professionals and 68% of design professionals.
Data Source and Community
The insights gathered from over 900 home improvement firms for this report were conducted between June 14th and July 1st, 2025. The Houzz community continues to reflect a broad spectrum of remodeling and design professionals, serving approximately 70 million homeowners.
As the construction and design sectors strive to navigate these challenging times, many professionals remain cautiously optimistic about the upcoming quarter, hoping for a positive shift in market dynamics.
Deeper Dive: News & Info About This Topic
Additional Resources
- Hardware Retailing: Houzz Reports Softer Q2 Expectations
- Wikipedia: Construction
- Kitchen & Bath Design: 2025 Optimism Blunted
- Google Search: Construction Industry Trends
- House Beautiful: Tariff-Proof Home Renovations
- Encyclopedia Britannica: Interior Design
- LBM Journal: Construction Labor Shortage Improving
- Google News: Design Sector Trends
