Construction and design professionals are entering Q3 2026 with cautious optimism, according to the latest Houzz Pro Industry Barometer. The quarterly survey found that firms expect stronger business activity even as recent data showed mixed results and persistent cost pressures.
“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 dealing with a mix of cost, labor and client-related concerns, and they are responding strategically to protect profitability.”
The most common challenges cited in the report include rising product and material costs — reported by 40% of construction firms and 48% of design firms. Client financial uncertainty affected 33% of construction and 49% of design businesses. Increased labor costs (28% construction, 20% design) and higher fuel or transportation costs also weighed on the industry.
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In response, firms are adjusting. Raising prices or rates was the most common response (40% construction, 35% design). Other adjustments included becoming more selective about project size and budgets and adjusting project timelines. Construction firms are also narrowing their geographic focus, with 1 in 5 concentrating on projects closer to their home office and 19% reducing overall project volume. Design firms, meanwhile, are leaning into repeat clients and referrals, with 25% focusing on that approach.
Construction firms expect stronger inquiries, but backlog remains flat
The Expected Business Activity Indicator for construction rose 3 points to 61 for Q3 2026, driven primarily by improved expectations for project inquiries, which increased 4 points to 61. New committed projects edged up to 60. But the picture varies by business type: build-only remodelers anticipate a 9-point gain to 59, while design-build firms expect a slight pullback to 63, down from 66 in Q2. Both remain above the 50 threshold, meaning more firms expect growth than decline.
Backlogs are steady compared to last year at 6.1 weeks. Build-only remodelers report a 6.0-week backlog (down 0.4 weeks), while design-build remodelers have 6.2 weeks (up 0.4 weeks).
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However, the Recent Business Activity Indicator for Q2 was below 50 at 47, down 1 point from Q1. Project inquiries softened to 50, and new committed projects stayed at 45. Build-only remodelers saw a sharper recent decline to 47 from 50, while design-build remodelers inched up to 47 from 46.
Design sector surges with strong expectations and recent gains
The Expected Business Activity Indicator for the design sector increased to 68 for Q3 2026 (up 8 points from 60 in Q2 2026). The improvement reflects expected gains in both project inquiries, which rose to 67 (from 60), and new committed projects, which increased to 69 (from 61). Expectations for Q3
