Houzz Inc., a platform for home remodeling and design, has released the Q1 2025 Houzz U.S. Renovation Barometer. The report found that businesses across the construction sector and the architecture and design services sector are optimistic about activity in the first quarter of the year. Expectations among construction professionals are at their highest since Q3 2022. Optimism follows improved Q4 business activity compared with Q3. Recent business activity indicators for both industry sectors have increased and are above the 50-point benchmark, indicating that more firms reported improvements than declines in business performance.
“Strong Q4 performance and recent federal interest rate cuts have bolstered confidence among industry professionals as we enter the new year,” said Marine Sargsyan, Houzz staff economist. “With this solid foundation, construction firms are expressing the most positive sentiment we’ve seen for the sector in two and a half years. Confidence levels also remain high among architects and interior designers as new committed projects continue to reinforce demand expectations, though optimism among this sector has softened slightly.”
Q1 2025 Construction Sector Barometer
• The Expected Business Activity Indicator for construction businesses related to project inquiries and newly committed projects increased three points to 65 for Q1.. This marks the highest reading since Q3 2022. Compared with Q4 2024, Q1 2025 expectations for project inquiries increased 10 points to 69, while new committed projects decreased 2 points to 62. The index is above 50 points suggesting businesses expect Q1 2025 performance to be better than Q4 2024. Both build-only and design-build remodelers expect an uptick in Q1 2025 business activity, with the indicators reaching 65 and 66, respectively.
• The Project Backlog Indicator is 5.8 weeks at the beginning of Q1 2025, which is 0.9 weeks shorter than a year ago. Build-only remodelers report a decrease of 1.4 weeks to 5.0 weeks, while design-build remodelers report a 0.4-week decrease in wait times at 6.7 weeks.
• The Recent Business Activity Indicator related to project inquiries and newly committed projects increased to 54 in Q4 2024, up 7 points from the previous quarter, indicating improvement in Q4 business activity compared with Q3. This is driven by a 14-point increase in project inquiries to 60 in Q4, relative to the previous quarter. Newly committed projects remained stable at 48. Both groups reported a 7-point increase in recent business activity, bringing the indicators above 50 points. The recent business indicator reached 53 for build-only remodelers and 55 for design-build remodelers in Q4.
Q1 2025 Architectural and Design Services Sector Barometer
• The Expected Business Activity Indicator related to project inquiries and new committed projects declined to 68 in Q1 2025 (down 3 points from Q4 2024) for the architectural and design services sector. This is driven by a 7-point decline in expectations for project inquiries and stable expectations for new committed projects (66 and 69 points, respectively). While the indicator dipped 12 points for architects (65 points), interior designers expect an improvement in Q1 business activity, up 11 points reaching 72.
• The Project Backlog Indicator is 7.3 weeks at the beginning of Q1, a significant jump of 2.1 weeks compared with last year (5.2 weeks). This year-over-year increase is driven by architects, who report an 8.8-week wait time on average, up 2.7 weeks from last year (6.1 weeks in Q1 2024). Interior designers reported a 1-week increase in wait times (4.6 weeks in Q1 2025) compared with last year (3.6 weeks in Q1 2024).
• The Recent Business Activity Indicator related to project inquiries and new committed projects increased to 58 in Q4 2024 (versus 54 in Q3). This increase is driven by an uptick in project inquiries (up 4 points from Q3 to 56 in Q4) and new committed projects (up 4 points from Q3 to 59 in Q4). While the business activity indicator is only up by 1 point at 61 for architects, interior designers reported a significant 10-point jump in business performance, climbing above the 50-point line to 53 points.
The quarterly Houzz U.S. Renovation Barometer provides timely insights into the residential renovation industry, including expectations, project backlogs, and recent activity among businesses in the U.S. construction and architectural and design services sectors. Scores for each component are computed as a seasonally adjusted diffusion index on a scale of 0 to 100, with index values over 50 indicating that a greater proportion of firms reported quarter-over-quarter increases than those reporting decreases. Detailed methodology and underlying quarterly indices for the construction sector and the architectural and design services sector, and other information on market conditions, can be found on houzz.com/research. The Q1 2025 Barometer was fielded from December 16, 2024, through January 11th, 2025, and garnered responses from over 1,000 home improvement firms on Houzz. n=1,139.
The Houzz community includes more than three million home remodeling and design professionals including architects, interior designers, general contractors, and design-build firms. Houzz Pro provides professionals and their clients with all-in-one project management and design software, including CRM, estimates, and takeoffs.
Have something to say? Share your thoughts with us in the comments below.