Houzz Inc. recently released the Q3 2025 Houzz U.S. Renovation Barometer. The report reveals a continued decline in business sentiment across both the construction sector and the architecture and design services sector (hereafter referred to as “design”), marking the second consecutive quarter of reduced optimism as activity wanes. The outlook among surveyed firms is significantly lower than it was at the start of the year, although many still anticipate improved Q3 performance. This reflects caution from pros due to ongoing economic uncertainty, such as rising costs, potential tariffs, and inflation.
“Expectations have become increasingly cautious among construction and design professionals as they navigate ongoing economic challenges and reduced business activity,” said Marine Sargsyan, staff economist for Houzz. “That said, stable backlogs and gradual adjustments in response to market conditions indicate some resilience. Most are hopeful for improved momentum through the second half of the year.”
Q3 2025 Construction Sector Barometer
- The Expected Business Activity Indicator for construction businesses related to project inquiries and new committed projects decreased by 1 point to 58 for Q3 (from 59 for Q2). Both build-only remodelers and design-build firms expect improved Q3 business activity, with the indicator at 58 points each.
- The Project Backlog Indicator is 6.1 weeks in the beginning of Q3, which is 1.5 weeks shorter than a year ago. Build-only remodelers report a decrease of 1.2 weeks to 6.4 weeks, while design-build remodelers report a decrease of 1.9 weeks in wait times at 5.8 weeks.
- The Recent Business Activity Indicator related to project inquiries and new committed projects dropped to 38 (from 42 in Q2). This is driven by an 8-point drop in new committed projects to 34 in Q2, relative to the previous quarter. Project inquiries stayed stable at 42 points. The recent business indicator dropped to 35 for build-only remodelers and to 42 for design-build remodelers in Q2. Main challenges to business activity included increased prices of products and materials (45 percent), higher labor costs (32 percent), and difficulty maintaining profit margin (26 percent).
Q3 2025 Design Sector Barometer
- The Expected Business Activity Indicator related to project inquiries and new committed projects declined to 58 for Q3 2025 (down 4 points from Q2) for the architectural and design services sector. This is driven by a 4-point decline in expectations for project inquiries and a 4-point drop in expectations for new committed projects (58 each). While the indicators dipped 2 points for architects (to 57) and 8 points for interior designers (to 59), more businesses expect an improvement in business activity in Q3, when compared to Q2 activity, than those expecting declines.
- The Project Backlog Indicator is 5.9 weeks in the beginning of Q3, which is 0.2 weeks longer than a year ago. Architects report a decrease of 0.6 weeks to 6.7 weeks, while interior designers report an increase of 1.5 weeks in wait times at 4.4 weeks.
- The Recent Business Activity Indicator related to project inquiries and new committed projects decreased to 45 in Q2 (versus 59 in Q1). This decrease is driven by drops in both project inquiries and new committed projects in Q2, each decreasing by 11 and 16 points to 46 and 44, respectively. Top challenges to business activity included higher prices of products and materials (53 percent), increased labor costs (26 percent) and difficulty maintaining profit margin (23 percent).
A Deeper Look into Anticipated Economic Factors:
Houzz continued to explore how pros expect economic factors–such as new tariffs, rising interest rates, and labor shortages–to impact their businesses and the industry at large using the Q3 2025 Houzz U.S. Renovation Barometer survey. Findings (as reported by each industry sector) include:
- More than 9 in 10 residential construction and design professionals anticipate that market shifts will have a negative impact on their business in Q3 (93 percent construction, 94 percent design). Key factors include tariffs (48 percent construction, 59 percent design), inflation (42 percent construction, 46 percent design), and hesitation from clients when committing to projects (38 percent construction, 37 percent design).
- Pros are most concerned about tariffs on lumber or plywood (66 percent construction, 68 percent design), steel (56 percent construction, 65 percent design), flooring (50 percent construction, 60 percent design), and aluminum (41 percent construction, 43 percent design).
- Both sectors anticipate moderate to severe labor shortages, particularly among general laborers (59 percent construction, 48 percent design) and finish carpenters (45 percent construction, 39 percent design). Shortages of framers (31 percent construction, 29 percent design) and plumbers (36 percent construction, 31 percent design) are also notable concerns.