Report: Pro Contractors Expect Market to Improve in Q3

Houzz Inc., an AI-driven, all-in-one software for construction and design, released the Q3 2026 U.S. Houzz Pro Industry Barometer.* The report finds that construction and design professionals are entering Q3 with optimism despite ongoing economic pressures and mixed quarterly results. Construction firms expect business activity to improve, driven by stronger project inquiries, even after the recent business activity indicator remained below the 50-point threshold in Q2. Meanwhile design firms enter the quarter with significant momentum fueled by gains in both project inquiries and new committed projects. 

"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.”

Recent challenges were led by a mix of rising product and material costs (40% construction, 48% design), client financial uncertainty (33% construction, 49% design), increased costs of labor (28% construction, 20% design) and higher fuel or transportation costs (28% construction, 20% design). To navigate these challenges, pros are adapting business strategies. Raising prices or rates was the most common response (40% construction, 35% design), followed by becoming more selective about project size and budgets (34% construction, 32% design) and adjusting project timelines or phases (29% construction, 27% design). Construction firms are also narrowing their geographic focus, with 1 in 5 concentrating on projects closer to their home office (20%) or reducing overall project volume (19%). Meanwhile, design firms are prioritizing relationships by focusing on repeat clients and referrals (25%).

Looking ahead, the vast majority of construction and design firms anticipate ongoing pressures in the coming quarter (92% construction and 90% design). Maintaining profitability remains a key pressure point across both sectors as pros continue to navigate elevated costs, labor pressures and client-related constraints.

Q3 2026 Construction Sector Barometer

• The Expected Business Activity Indicator for construction businesses increased by 3 points to 61 for Q3 2026 (from 58 for Q2 2026), driven primarily by greater expectations for project inquiries, which rose 4 points to 61. New committed projects also inched up to 60 (up 1 point from Q2 2026). Trends diverged across pro types: build-only remodelers anticipate improved Q3 business activity, gaining 9 points from Q2 to reach 59, while design-build firms expect a modest pullback, declining 3 points from 66 in Q2 to 63 in Q3. Both indicators remain above 50, signaling that more firms expect business activity to improve than decline.
• Overall, the Project Backlog Indicator is steady compared with the same time last year: 6.1 weeks at the start of Q3 2026. Build-only remodelers report a 6.0 week backlog (down 0.4 weeks from 6.4 weeks), while design-build remodelers report a 6.2 week backlog (up 0.4 weeks from 5.8 weeks).
• The Recent Business Activity Indicator declined modestly to 47 in Q2 2026 (from 48 in Q1 2026). Project inquiries also softened slightly (dipping 1 point to 50), while new committed projects held steady at 45. The recent business activity indicator declined to 47 for build-only remodelers (from 50) but increased to 47 for design-build remodelers (from 46) in Q2 2026.

*If an indicator is above the 50-point line, more businesses reported an increase in expected or recent business activity compared with the previous quarter than those reporting decreases.