The home improvement industry is expected to grow more slowly than previously forecast as tariffs and housing market challenges dampen spending, according to new research from the Home Improvement Research Institute.

The total home improvement market, which reached $574.3 billion in 2024, is now projected to grow 3.4% in 2025, down from the 5% growth HIRI predicted in March. The revised outlook reflects what the trade group calls "prevailing macroeconomic challenges" including anticipated tariffs on building materials and a sluggish housing market.

The forecast reveals a growing split between professional and consumer markets. Consumer spending on home improvement is expected to rise just 2.6% in 2025, compared to 4.9% growth in the professional market. HIRI attributed the consumer slowdown to slowing wage growth and rising prices that are squeezing household budgets.

New tariffs on materials like copper and lumber could raise construction costs by 10% to 25% starting late next year, according to the research. Additional tariffs on imports from China, Canada and Mexico are also factored into the projections.

The housing market's "locked-in effect" — where homeowners with low mortgage rates avoid selling — continues to limit existing home sales, which are expected to climb slowly from 4.07 million in 2024 to 4.28 million in 2025.

Despite the near-term challenges, HIRI Executive Director Dave King said the long-term outlook remains strong, with the industry expected to add roughly $300 billion in additional spending over the next five years through 2029.