Interior Design Services NAICS 541410

Jul 20, 2025 - Remodeling Spending Growth to Slow

• Home remodeling spending growth is expected to remain flat in 2025 and the first half of 2026, according to the Leading Indicator of Remodeling Activity (LIRA) report by the Joint Center for Housing Studies at Harvard. Homeowner improvements and repairs are expected to increase 2% to $509 billion in the third quarter of 2025 compared to Q3 2024. In the fourth quarter of 2025, remodeling spending will rise quarter-over-quarter to $511 billion, up 1.8% from Q4 2024. Spending will increase to $524 billion in Q1 2026, up 2.2% from Q1 2025. In the second quarter of 2026, year-over-year spending is forecast to rise 1.2% to $518 billion. Joint Center expects a weak housing market to put downward pressure on remodeling spending. However, recent federal cuts to incentives for efficiency improvements may spur short-term growth as homeowners make upgrades before benefits expire at the end of the year.
• Single-family housing starts decreased 4.6% in June 2025 from May, marking the weakest starts activity since June 2024, according to the US Census Bureau. Permitting activity for single-family housing – an indicator of future homebuilding activity – rose 0.2% in June compared to the month before. High interest rates, economic uncertainty, and an oversupply of unsold new homes are weighing on the US homebuilding market, according to Reuters. The inventory of new homes waiting to be sold is the highest since 2007. Some economists suggest that lower interest rates would be a lifeline for the sluggish housing market, but the Federal Reserve is concerned that lowering rates could exacerbate the inflationary effects of the Trump administration’s tariff policies. Housing starts and building permitting activity are indicators of future interior design services demand.

• High home prices and mortgage rates have priced many would-be homebuyers out of the market, creating robust pent-up demand that’s unlikely to be realized in the near term, according to The Wall Street Journal. In 2024, there were about 1.1 million first-time buyers, compared to an annual average of about 2.1 million over the last 20 years, according to the National Association of Realtors (NAR). To afford a median-priced new home today, a buyer would need an income of $127,000 compared to $79,000 for the same home in 2021, according to Harvard’s Joint Center for Housing Studies. Industry watchers suggest that many first-time buyers may remain stuck on the sidelines, absent a significant drop in mortgage rates or a recession that pushes down home values.
• Home builder confidence in the single-family market rose slightly in July but remained in negative territory for the 15th consecutive month, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), increased one point to 33 in June 2025. Any HMI reading over 50 indicates that more builders see conditions as good than poor. The US housing market faces headwinds from high interest rates and economic uncertainty. The HMI survey also showed that 37% of builders have reduced home prices to lure potential buyers off the sidelines, although the average price reduction of 5% has remained unchanged since November 2024.