Survey points to a renovation rebound
According to the 2025 U.S. Houzz State of the Industry, brighter building days may be ahead.
The report provides an outlook for 2025 and review of 2024 performance for residential construction and design businesses based on data reported by more than 1,500 professionals in the Houzz community. The findings reveal stronger optimism for 2025 with more than 3 in 5 firms in the construction and design sectors projecting a positive business outlook (from 60 percent of architects to 73 percent of specialty contractors).
This follows a year marked by revenue and profitability declines reported across industry groups, in contrast with the growth expectations reported in the 2024 U.S. Houzz State of the Industry Study. Firms largely attribute missed revenue targets to a decline in the number of projects, as well as smaller project budgets.
“Home professionals are entering 2025 with renewed confidence and expectations for growth in both revenue and profitability after navigating two difficult years,” said Marine Sargsyan, Houzz staff economist. “Pros report that they’ve implemented new processes for operational efficiency and client communication, and made strategic investments in technology to address the challenges they faced last year. This will better position them for an anticipated increase in demand, enhance their resilience amidst potential tariffs and leverage expected improvements in both local and national economic conditions.”
Firms in both the construction and design sectors anticipate higher revenue growth in 2025 than they expected for 2024. Specialty contractors and general contractors are expecting double-digit revenue growth in 2025 (average growth of 12.4 percent and 11.3 percent, respectively). Architects, design-build firms, interior designers and landscaping and outdoor service firms also expect a high growth rate (9.1 percent to 9.4 percent). Strategies to support greater revenue growth include bringing in larger-budget projects, adjusting pricing structures, and offering new products and services.
Investing in the business
In 2024, firms across the industry prioritized investments in key areas to address ongoing challenges and enhance operational performance. Increasing efficiency was a top focus, with 40 percent of architects, 42 percent of specialty contractors, and 40 percent of design-build firms dedicating resources to streamline processes and improve productivity. Similarly, improving communication with clients and teams was a significant priority, particularly among design-build firms (45 percent), general contractors (44 percent), and interior designers (39 percent). Finally, 20 percent of architects, 16 percent of interior designers and 16 percent of design-build firms focused on maximizing returns on existing technology investments.
Nearly all businesses in the residential construction and design industry leverage software to manage operations, engage clients, automate workflows, facilitate payments, and enhance brand visibility. For example, drafting and rendering software is used by 84 percent of architects, 57 percent of design-build firms, 54 percent of interior designers, and 51 percent of landscaping and outdoor service firms. Within the construction sector, software for cost and bid estimation is routinely used by nearly 2 in 5 design-build firms (38 percent), specialty contractors (37 percent) and a third of general contractors (33 percent). Beyond these specialized tools, businesses also depend on software for billing and invoicing, marketing, CRM, employee time tracking and website building.
Key findings from the report include:
Specialty contractors lead in confidence. Optimism is most widespread among specialty contractors, and nearly three-quarters (73%) have a good or very good outlook for 2025. Sentiment is also positive among the majority of interior designers (70%), design-build firms (68%), general contractors (61%) and architects (60%).
Bullish on demand. More than half of businesses across industry groups anticipate heightened demand for their services (51% to 77%). Businesses in the design sector are most bullish, led by specialty decorating service firms (77%), architects (67%) and interior designers (58%). In the construction sector, design-build firms are the most confident (62%), followed by general contractors (57%) and specialty contractors (52%).
Presumed improved local and national economies. More firms in both the construction and design sectors expect improvements in the national economy (37% to 57%) and their local economies (38% to 50%) than those who expect declines. This reflects a vast improvement over last year’s uncertainty, when far fewer businesses anticipated improvements to the national economy (17% to 34%) and local economies (25% to 38%).
Labor shortages anticipated to continue. Labor shortages will continue to be a persistent challenge, as 6 out of the 7 industry groups predict. Expectations for rising labor costs in 2025 are also prevalent across the industry, particularly among specialty contractors (57%) and design-build firms (56%).
Product and material costs expected to rise. While the availability of products and materials is expected to remain largely unchanged, more companies across the seven industry groups anticipate costs to rise in 2025 than expect them to decrease. The sentiment is most widespread among interior designers and specialty interior service firms (59%, each), closely followed by construction businesses. Specifically, 58% of general contractors, 56% of design-build firms and 56% of specialty contractors expect product and material costs to increase.
Decline in revenue and profitability in 2024. In 2024, businesses across all seven industry groups reported the biggest year-over-year dip in average annual revenue growth since 2014 (-0.3% to -7.2%), with the design sector impacted most significantly. Across all seven industry groups, a larger share of firms reported an annual profit decrease in 2024 than in 2023 (44% to 60% versus 23% to 39%). The 2024 decline in profit is most widespread among landscaping and outdoor service firms, with 3 in 5 reporting a decrease. Specialty interior service firms follow closely, with 56% reporting a profit decrease in 2024.
View the complete 2025 U.S. Houzz State of the Industry report here.
