Residential construction firms expect stronger business activity in the third quarter, with Houzz’s Expected Business Activity Indicator rising three points to 61 on stronger project inquiries. This is despite recent business activity holding below the break-even mark at 47 and 40% of construction pros citing rising material costs as a challenge, according to Houzz’s Q3 2026 U.S. Houzz Pro Industry Barometer.
The report cites cost as the dominant pressure for construction and design firms. In addition to rising material costs, construction pros reported cost challenges including client financial uncertainty (33%) and increased cost of labor (28%).
"Construction and design pros are heading into Q3 with renewed confidence as expectations for improved business activity broaden across the industry, with the design sector seeing especially strong momentum," said Marine Sargsyan, head of economic research at Houzz. “That optimism comes alongside persistent market pressures. Pros are navigating a combination of cost, labor and client-related concerns, and they are responding strategically to protect profitability.”
To protect profitability, 40% have raised prices, 34% have grown more selective about project size and budget, and one in five have narrowed their geographic focus to jobs closer to home. Looking ahead, 92% of construction firms expect these pressures to continue into the coming quarter.
Read the full report here.
