Houzz Reports Softer Q2 Expectations for Construction and Design Sectors

Houzz, an online design forum, released its Q2 2025 Renovation Barometer, which tracks residential renovation market expectations, project backlogs and recent activity among businesses in the construction sector.

The report found that businesses across the construction sector and the architecture and design services sector have less optimism about activity in the second quarter of the year. This follows a significant dip in Q1 performance among the construction sector while the design sector’s activity remained stable. Expectations are also clouded by concerns over the potential impact that tariffs and other economic factors will have on their businesses.

“Optimism continues, yet residential construction and design businesses are moderating expectations amid mixed Q1 activity and economic uncertainty,” says Marine Sargsyan, Houzz staff economist. “This tempered outlook is unsurprising, as firms continue to navigate challenges including rising material costs, cautious client spending and persistent labor shortages. In response, many firms are proactively adjusting procurement strategies and selectively stockpiling materials in preparation for anticipated tariff-driven price hikes, especially on lumber, steel and cabinetry.”

Q2 2025 Construction Sector Barometer

• The Expected Business Activity Indicator for construction businesses related to project inquiries and new committed projects decreased six points to 59 for Q2, down from 65 for Q1. This is largely driven by a 12-point decline in expectations for project inquiries in Q2. Expectations for new committed projects inched down to 61 for Q2, from 62 for Q1. While build-only remodelers expect an uptick in Q2 business activity, with the indicator reaching 68, design-build firms are less bullish at 49, down from 66.
• The Project Backlog Indicator is around six weeks at the beginning of Q2, which is 0.1 weeks shorter than a year ago. Build-only remodelers report a decrease of two weeks to almost five weeks, while design-build remodelers report a 1.8-week increase in wait times at eight weeks.
• The Recent Business Activity Indicator related to project inquiries and new committed projects dropped to 42, down 12 points from the previous quarter, indicating slowdowns in Q1 business activity compared with Q4 2024. This is driven by an 18-point drop in project inquiries to 42 in Q1, relative to the previous quarter. New committed projects decreased by five points to 43. The recent business indicator dropped to 39 for build-only remodelers and to 46 for design-build remodelers in Q1, as more businesses reported a decline in business activity than those reporting improvements.

Q2 2025 Architectural and Design Services Sector Barometer

• The Expected Business Activity Indicator related to project inquiries and new committed projects declined to 62 for Q2 2025, down six points from Q1, for the architectural and design services sector. This is driven by a four-point decline in expectations for project inquiries and a 7-point drop in expectations for new committed projects, 62 each. While the indicators dipped six points for architects, to 59, and 5 points for interior designers (to 67), more businesses expect an improvement in business activity in Q2, compared to Q1 than those expecting declines.
• The Project Backlog Indicator is almost six weeks in the beginning of Q2, consistent with last year’s wait times (5.6 weeks in Q2 2024). Both architects and interior designers each reported 0.1 week increase in wait times compared with the previous year.
• The Recent Business Activity Indicator related to project inquiries and new committed projects increased to 59 in Q1, versus 58 in Q4 2024. This slight increase is driven by an uptick in both project inquiries and new committed projects in Q1, each increasing by one point to 57 and 60, respectively. The indicator is down 2 points for architects and up five points for interior designers. Despite the minor decline reported by architects, the overall indicator is above the 50-point line, suggesting widespread improvements in business activity in Q1 compared to Q4 2024.