Construction pros see spring rebound despite economic uncertainty

A new survey indicates that residential contractors and remodelers began the second quarter on an optimistic note, but economic uncertainty driven by the war in Iran could complicate the picture. 

The Houzz Q2 2026 U.S. Houzz Pro Industry Barometer, a survey conducted between March 17 and April 6, found that construction and design pros expect a mixed spring after a Q1 slowdown. Respondents reported softer activity to start 2026 but entered the second quarter with cautious optimism and leaner backlogs, according to the report. 

The quarterly survey of 989 residential construction and design firms on the Houzz platform found that sentiment is diverging by business type. Design-build firms are signaling a sharp pickup in work, while build-only remodelers expect more modest gains. In the design sector, interior designers are more upbeat than architects.

“After recent activity slowed in the first quarter compared with the end of 2025, construction and design pros are entering Q2 with cautious optimism, particularly in construction, where expectations for new projects are showing early signs of a rebound,” Marine Sargsyan, head of economic research at Houzz, said in a statement.

“At the same time, persistent cost pressures and client hesitation are reshaping how firms compete. We’re seeing pros adapt in real time with construction firms investing in workforce development and more flexible pricing, while design professionals are doubling down on client experience and branding.”

How firms are competing for projects and talent

According to the Houzz survey, most firms are focusing on communication, pricing and workforce development to stay competitive in this environment.

In response to heightened competition over the past three months, 60% of construction pros and 45% of design pros said they have improved client communication. Construction firms are relying more on financial tools to win work, with 42% adjusting pricing or offering promotions, versus 19% of design firms.

Recruiting and retention strategies are also shifting. More than half of construction firms (57%) said they are offering on-the-job training to appeal to younger workers. Design firms are leaning more on academic partnerships, cited by 26% of respondents.

Both sectors reported increased use of social media in recruiting — 35% of construction firms and 36% of design firms — and are highlighting their use of advanced technology, including AI and project management platforms, to attract tech-focused candidates (10% of construction firms and 16% of design firms).

For remodelers and design practices, the barometer suggests that investments in communication, digital tools and training are becoming table stakes in a market where homeowners are more selective and projects are taking longer to convert.

Costs, macro risk and labor weigh on outlook

Rising input costs and a choppy macro backdrop remain the primary headwinds as firms plan for the second quarter. Nearly half of construction businesses (49%) and design firms (45%) cited higher prices for products and materials as a top concern, according to the company’s announcement.

Client hesitation is another drag. More than one-quarter of firms in both sectors reported that homeowners are delaying projects, including 27% of construction companies and 30% of design firms. In construction, 67% of respondents reported facing skilled labor shortages.

Bigger-picture risks are especially acute for design professionals. Roughly 30% of design firms pointed to geopolitical uncertainty (30%) and tariffs (30%) as concerns, compared with 23% and 17% of construction firms, respectively.

Shaky consumer confidence is another issue. According to a survey from the University of Michigan, consumer sentiment fell 11% in March to its lowest level on record, driven primarily by economic shocks resulting from the war in Iran. And Redfin says that 36% of American workers are delaying or canceling big purchases as consumers worry about job security, inflation and high borrowing costs.               

Construction sentiment improves as backlogs ease

The Expected Business Activity Indicator for construction firms, which tracks expectations for project inquiries and new committed projects, rose 3 points to reading of 58 for Q2 2026. Scores above 50 indicate more firms reporting quarter-over-quarter increases than decreases.

The improvement was driven by stronger expectations for new committed projects, which climbed to 59, up 6 points from Q1. Expected project inquiries held steady at 57.

Outlooks diverge sharply by business model:

• Design-build firms reported a Q2 expected business activity reading of 66, up 10 points from 56 in Q1
• Build-only remodelers posted an expected activity score of 50, down 5 points from 55, signaling a flatter pipeline

Backlogs in construction continued to normalize from last year’s elevated levels. The Project Backlog Indicator fell to 5.6 weeks at the start of Q2 2026, down from 6.4 weeks a year earlier.

• Build-only remodelers reported a 4.6-week backlog, down slightly from 4.8 weeks in Q2 2025
• Design-build remodelers saw a larger decline, to 6.7 weeks from 8.0 weeks a year earlier

Recent activity weakened during the first quarter. The Recent Business Activity Indicator for construction — covering actual project inquiries and new committed projects — declined to 48 in Q1 2026 from 51 in Q4 2025.

• Project inquiries improved modestly, rising 2 points to 51
• New committed projects fell 7 points to 45

Among firm types, the recent activity index fell to 50 for build-only remodelers, down from 59, but rose to 46 for design-build firms, up from 43.

For lenders and suppliers focused on the remodeling channel, shrinking backlogs and lower recent activity suggest some easing of capacity constraints alongside softer near-term demand, particularly for smaller, build-only operators.

Design firms see softer Q2 expectations, shorter backlogs

In the architectural and design services sector, expectations for the spring softened slightly and backlogs fell more sharply than in construction.

The Expected Business Activity Indicator for design firms slipped to 60 for Q2 2026, down from 61 in Q1. Expectations for project inquiries eased to 60 from 62, while expectations for new committed projects edged up to 61 from 60.

Sentiment diverged within the sector:

• Architects’ expected business activity fell to 58, down from 61 in Q1
• Interior designers’ reading rose to 65, up from 61, signaling stronger demand for interior work.

Design backlogs compressed significantly. The Project Backlog Indicator dropped to 4.0 weeks at the start of Q2 2026, 1.7 weeks shorter than the 5.7 weeks reported a year earlier.

• Architects’ backlogs fell to 4.0 weeks, down from 6.3 weeks in Q2 2025
• Interior designers also reported a 4-week backlog, down from 4.8 weeks in Q2 2025

Recent business activity pulled back in Q1. The design sector’s recent activity indicator fell to 48, down from 54 in Q4 2025.

• Project inquiries dropped to 45, down 9 points
• New committed projects dipped to 52, down 1 point

Architects reported a sharper slowdown, with recent activity falling from 55 to 45. Interior designers, by contrast, saw recent activity rise from 5o to 53.

Tyler Williams reported and wrote this article with drafting assistance from HousingWire Automation, an editorial tool that helps transform announcements and industry data into HousingWire-style news coverage.