Palo Alto, Calif. — The residential construction and design industry is entering 2025 with renewed confidence after experiencing revenue and profitability declines in 2024, according to Houzz Inc.’s annual U.S. Houzz State of the Industry report.

The survey found that more than three in five firms anticipate a positive business outlook for the year ahead, with specialty contractors leading in confidence.

Industry sentiment and expected growth

While 2024 proved challenging — marked by declining revenues and tighter project budgets — industry professionals anticipate a rebound. Specialty contractors and general contractors expect double-digit revenue growth in 2025, averaging 12.4% and 11.3%, respectively. Other sectors, including architects, design-build firms, interior designers and landscaping professionals, forecast growth between 9% and 9.4%.

“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.”

Firms are optimistic about an expected increase in demand, as well as improvements in local and national economic conditions. More than half of businesses across industry groups anticipate stronger demand, with specialty interior service firms (77%), architects (67%) and interior designers (58%) expressing the most confidence.

Investment in efficiency and technology

To better position themselves, many businesses invested in operational efficiency and communication improvements in 2024. According to the report:

• 40% of architects, 42% of specialty contractors and 40% of design-build firms focused on streamlining operations.
• Communication improvements were a priority for 45% of design-build firms, 44% of general contractors and 39% of interior designers.
• Maximizing returns on existing technology was a focus for 20% of architects, 16% of interior designers and 16% of design-build firms.

Technology remains central to business operations, with nearly all firms using software for project management, client engagement and financial processes.

Drafting and rendering software is widely used, particularly among architects (84%) and design-build firms (57%), while cost and bid estimation software is employed by 38% of design-build firms and 37% of specialty contractors.

Challenges and market conditions

Despite the positive outlook, industry professionals remain wary of ongoing challenges. Labor shortages are expected to persist, with six of the seven industry groups predicting difficulties in hiring. Rising labor costs are also a concern, particularly for specialty contractors (57%) and design-build firms (56%).

Material costs are another issue, with more companies anticipating price increases in 2025 than decreases. Interior designers and specialty interior service firms (59% each) are the most concerned, followed by general contractors (58%) and design-build firms (56%).

The past year was marked by one of the most significant year-over-year revenue declines since 2014, with losses ranging from -0.3% to -7.2%. Profitability also took a hit, with a greater share of firms (44% to 60%) reporting decreased profits compared to the previous year. Landscaping and outdoor service firms were among the hardest hit, with 60% experiencing a decline in profitability.

As firms prepare for 2025, many are looking to attract larger-budget projects, adjust pricing structures and expand service offerings to drive growth.

The survey was conducted among 1,537 firms in the Houzz U.S. community that provide residential construction and design services. The study, which includes responses from architects, interior designers, general contractors, design-build firms, specialty contractors, and landscape professionals, was fielded from Nov. 7 to Dec. 15, 2024.

See also:

• Houzz Pro expands toolkit to improve project management
• Houzz Pro adds AI-powered scheduling and estimate tools

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