Optimism Wavers Among Design and Construction Pros

With costs expected to rise and homeowners putting projects on the back burner, home building pros expect to see some tapering off of demand in the near future
April 16, 2025
3 min read
5607798 © Mark Hryciw | Dreamstime.com
A closeup of a floor plan and tools used for a renovation at a time when home building pros feel cautious about the economy and their business.
Amid ongoing economic concerns, home building pros are lowering their expectations for the remainder of 2025.

Optimism among home building and design professionals is wavering after heightened business activity earlier in the year. According to home remodeling and design platform Houzz’s Q2 2025 U.S. Renovation Barometer, construction and design businesses are going into the rest of 2025 with a little bit more caution amid rising material costs, economic uncertainty, and impacts from tariffs.

“Optimism continues, yet residential construction and design businesses are moderating expectations amid mixed Q1 activity and economic uncertainty,” says Marine Sargsyan, staff economist at Houzz. “Firms are navigating challenges including rising costs, cautious client spending, and labor shortages. Many are adjusting procurement strategies and selectively stockpiling materials to mitigate anticipated tariff-driven price hikes.”

Construction and Design Firms Lower Their Expectations

Houzz’s Expected Business Activity Indicator for construction firms—which measures project inquiries and newly committed projects—declined six points to 59 during Q2 2025. This is primarily due to a 12-point drop in expected project inquiries. This was especially the case for design/build firms, which saw a sharper decline to 49, down from 66 in Q1 2025.

The design sector also reported a softer outlook for the year, with its Expected Business Activity Indicator dipping to 62. Both architects and interior designers expect to see less activity in the coming months, with both groups seeing a five- and six-point decrease, respectively. Even so, when compared with Q1 projections, a greater number of design businesses reported that they expect to see improvements in the coming months.

Project Backlogs Remain Stable

While most construction and design firms will be proceeding with caution into the rest of 2025, project backlogs remained stable across the board. Heading into Q2 2025, construction firms reported an average backlog of 6.4 weeks, which is only a slight decline of 0.1 weeks from the previous year.

Build-only remodelers saw the greatest decrease, with project backlogs decreasing to 4.8 weeks, while design/build firms actually reported an increase to 8 weeks. Interior design and architecture firms also maintained a consistent backlog of projects at 5.7 weeks.

Economic Pressures Continue to Stress Home Building Pros

Expectations have primarily been dampened by the state of the economy, according to the report. More than 90% of surveyed construction and design professionals expect negative impacts from current economic conditions, with many citing tariffs, rising material costs, and high interest rates as top concerns.

Tariffs were the largest concern for those surveyed, with 75% of construction professionals and 66% of design professionals worried about higher costs. Additionally, 53% of both design and construction professionals cite supply chain disruptions as their biggest fear surrounding the impact of tariffs.

Businesses in the design sector anticipate tariffs will affect the supply and cost of appliances, cabinets, and light fixtures the most. Meanwhile, those in the construction industry are concerned about the prices for cabinets, appliances, plumbing fixtures, lighting fixtures, and windows.

Strategies for Moving Forward

To address cost volatility, 79% of construction businesses and 67% of design firms say they have mitigation strategies in place. Most businesses say they will likely pass cost increases on to clients, but some construction pros say they plan to absorb some costs or stockpile materials at a cheaper rate while they still can.

 

About the Author

Catherine Sweeney

Catherine Sweeney is the associate editor for Pro Builder and Custom Builder, where she creates both digital and print content, including Pro Builder’s daily e-newsletter and various news stories for both brands. Before joining SGC Horizon, she began her career in local journalism, later pivoting to the commercial real estate industry where she worked for several years as a reporter and editor.

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