The home renovation industry is bouncing back with renewed optimism for 2025 after weathering a challenging 2024, according to a new Houzz industry report.

The report, which surveyed more than 1,500 residential construction and design professionals, reveals that more than three in five firms project positive business conditions for 2025, with specialty contractors showing the highest confidence at 73%.

This optimism comes despite widespread revenue and profitability declines in 2024, marking the industry's largest year-over-year revenue dip since 2014. The design sector was hit particularly hard, with some firms reporting revenue decreases of up to 7.2%.

"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.

Specialty contractors and general contractors are projecting the strongest comebacks, forecasting average revenue growth of 12.4% and 11.3% respectively. Architects, design-build firms, and interior designers also anticipate robust growth between 9.1% and 9.4%.

The industry's recovery strategy includes investments in operational efficiency and improved client communication. Nearly all businesses now use specialized software for various operations, with 84% of architects utilizing drafting and rendering tools.

However, challenges persist. The majority of firms expect continued labor shortages and rising costs for both materials and labor in 2025. Despite these concerns, more businesses anticipate improvements in both national and local economies compared to last year's outlook.