The home renovation industry is entering 2025 with renewed optimism following a robust fourth-quarter performance, according to Houzz's latest U.S. Renovation Barometer report. The findings suggest a resilient market that is gaining momentum, particularly in the construction sector.

Construction businesses recorded their highest confidence levels since Q3 2022, with the Expected Business Activity Indicator rising to 65 points in Q1 2025. Project inquiries saw a notable 10-point increase to 69, though new committed projects slightly decreased to 62. Both build-only and design-build remodelers expressed positive outlooks, with activity indicators reaching 65 and 66 points, respectively.

"Strong Q4 performance and recent federal interest rate cuts have bolstered confidence among industry professionals," 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."

However, project backlogs in the construction sector have shortened compared to last year. The current wait time of 5.8 weeks represents a decrease of nearly one week from the previous year. Build-only remodelers reported the most significant reduction, with wait times dropping 1.4 weeks to 5.0 weeks.

The architectural and design services sector shows more varied results. While interior designers anticipate business growth with an 11-point increase to 72, architects reported a 12-point decline in expectations, bringing their indicator to 65 points. This divergence suggests different market dynamics affecting various segments of the industry.

Perhaps most notably, project backlogs for architects have increased substantially, reaching 8.8 weeks – up 2.7 weeks from last year. Interior designers also saw a modest increase in wait times, up one week to 4.6 weeks. These extended backlogs indicate strong underlying demand despite mixed sentiment about future business activity.

Recent business performance data from Q4 2024 shows broad improvement across both sectors. The construction sector's Recent Business Activity Indicator rose 7 points to 54, driven by a significant 14-point increase in project inquiries. Meanwhile, the architectural and design services sector saw its indicator climb to 58, with interior designers reporting a particularly strong 10-point jump in business performance.

The quarterly survey, conducted between December 16, 2024, and January 11, 2025, gathered responses from over 1,000 home improvement firms. The comprehensive data suggests that while different segments of the renovation industry face varying challenges and opportunities, the overall market maintains a positive trajectory heading into 2025.

These findings come when home improvement continues to be a priority for many homeowners despite ongoing economic considerations. The impact of recent interest rate cuts appears to provide additional momentum to an already active market, particularly in the construction sector.