US Construction Sector NAICS 23

Nov 4, 2025 - Building Design Services Demand Remains Weak

• Demand for building design services fell in September from the prior month, according to an October report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) dropped to 43.3 compared to August’s reading of 47.2. Any reading of 50 or more indicates growth in architectural billings. The score for new project inquiries dropped to 50.1 in September from 50.3 in August, and the index for the value of new design contracts decreased from 47.2 to 46.3. September marked the 19th consecutive month of decline for new design contracts. The AIA’s Chief Economist, Kermit Baker said, "Unfortunately, business conditions remain relatively weak at architecture firms. There was some erosion in project backlogs this past quarter, with the greatest slippage coming from firms with an institutional specialization."
• Home builder confidence in the single-family market improved in October but remained solidly in negative territory, according to the National Association of Home Builders (NAHB). Home builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), rose five points to 37 in October 2025 compared to September's reading of 32. Any HMI reading over 50 indicates that more builders see conditions as good than poor. October's HMI marked the highest reading since April 2025. Builders are cautiously optimistic as the average for a 30-year fixed-rate mortgage dropped to 6.3%, and the Federal Reserve is expected to ease interest rates further later in the year. However, the housing market remains challenging as many would-be buyers stay on the sidelines waiting for lower mortgage rates.

• Home remodeling spending is expected to remain stable for the rest of this year and through mid-2026, according to the Leading Indicator of Remodeling Activity (LIRA) report released in October by the Joint Center for Housing Studies at Harvard. Homeowner improvements and repairs are expected to increase 1.9% to $511 billion in the fourth quarter of 2025, compared to Q4 2024. In the first quarter of 2026, remodeling spending will reach $524 billion, up 2.4% from Q1 2025. Spending will then moderate to $519 billion in Q2 2026, up 2.1% from Q2 2025. In the third quarter of 2026, year-over-year spending is forecast to rise 1.9% to $517 billion. While solid remodeling permitting activity and gradually improving single-family home sales will support remodeling activity, potential headwinds include continued weakness of housing starts and economic uncertainty.
• North American construction and engineering spending in 2025 is expected to decline 1% after increasing an estimated 6% in 2024, according to FMI’s fourth-quarter 2025 North American Engineering and Construction Outlook. With a rise of 12%, the sewage and waste disposal sub-sector will lead 2025 nonresidential construction spending growth, followed by religious (10%), water supply (+7%), conservation and development (+5%), amusement and recreation (+4%), public safety (+4%), and transportation (+4%). However, spending on power, highway, and street construction is expected to remain flat in 2025. Residential construction spending is expected to decline 2%. Multifamily construction is expected to decrease by 9% in 2025, amid oversupply in some key markets and weak rent growth. Single-family construction is projected to drop 3% in 2025, as stubbornly high interest rates and elevated home prices reduce demand.