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.
Houzz Q3 2025 Renovation Barometer Shows Declining Optimism in Construction and Design Sector
The recently released Q3 2025 Houzz U.S. Renovation Barometer has highlighted a disturbing trend for the construction and design industry. Released on July 23, 2025, the report indicates a continued decrease in business sentiment within both the construction sector and the architectural design services sector. This marks the second consecutive quarter of reduced optimism, primarily due to dwindling market activity.
The overall business outlook has taken a significant downturn since the beginning of 2025, with many professionals expressing concerns about economic challenges that could impact future performance. Despite these worries, some firms remain hopeful and anticipate an improvement in business activity for the third quarter.
Diminishing Expectations Amid Economic Turmoil
Several economic factors have contributed to this cautious sentiment among construction and design professionals. Rising costs, possible tariffs, and ongoing inflation are at the forefront of these concerns. A significant finding from the report is the Expected Business Activity Indicator for construction-related project inquiries and new projects, which took a hit, decreasing by 1 point to 58 in Q3 2025, down from 59 in Q2.
Furthermore, expectations for new committed projects dropped remarkably by 9 points in Q3, even as expectations for project inquiries saw a modest increase of 7 points, reaching 64.
Both build-only remodelers and design-build firms project a slight improvement in business activity, each reporting expectations at 58 points. However, the Project Backlog Indicator stands at 6.1 weeks, which is 1.5 weeks shorter than the same period last year, signaling a potential slowdown in future workloads.
Trends in Business Activity Indicators
The report also noted a dip in the Recent Business Activity Indicator, which fell to 38 from 42 in the previous quarter. The decline is attributed to an 8-point fall in new committed projects, which now sit at 34. Stable project inquiries at 42 points slightly offset this decline but do not herald strong overall growth.
In the design sector, the Expected Business Activity Indicator also declined to 58 for Q3, dropping 4 points from Q2. Both architects and interior designers reported lower expectations, with architects at 57 points and interior designers at 59.
Challenges Embattling the Sector
Personal and economic challenges plague both sectors. Among construction professionals, 45% identified increased product and material costs as a major concern, while 32% pointed to higher labor costs and 26% faced difficulties in maintaining profit margins. The design sector shares these worries, with 53% citing rising product and material prices and 26% indicating higher labor costs as significant issues.
Furthermore, a striking 93% of residential construction professionals expect market shifts to have a negative impact on their businesses in Q3, followed closely by 94% of design professionals. Concerns about tariffs and inflation continue to rise, with 48% of construction professionals and 59% of design professionals fearing repercussions from potential tariffs.
Future Insight and Industry Trends
Responses were gathered from over 900 home improvement firms between June 14th and July 1st, 2025. The Houzz community boasts over 3 million remodeling and design professionals and 70 million homeowners, providing a substantial data pool for assessing industry health.
Overall, while there are slight signs of optimism in project inquiries and some firms still anticipate improved business, the broader sentiment remains one of caution. The ongoing economic challenges continue to create a tough environment for both construction and design professionals as they navigate this uncertain landscape.
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
