Contractors Weigh in on Business Conditions in Q2 2025

According to survey results from the Quarterly Contractor Business Sentiment Tracker for Q2 2025, the project pipeline has remained relatively steady — although the scope of the work being done has changed.

Released by The Home Improvement Research Institute (HIRI) Institute in partnership with The Farnsworth Group, the Quarterly Contractor Business Sentiment Tracker found that “enhancement” projects and remodels have gained some ground. The report noted, “We’re seeing a slight increase in terms of the average number of projects bid on and awarded, with both numbers up from the same quarter in 2024.”

Noticeable shifts have occurred when it comes to budget. Contrary to several design industry reports on the luxury market, the Contractor Business Sentiment Tracker revealed that projects valued at $100K or more actually fell to a five-quarter low. HIRI experts speculate that consumer confidence has caused homeowners to hit pause when it comes to planning major renovations or upgrades in this monetary bracket.

However, projects in the $1K to $5K range increased during the second quarter, while projects valued at under $1K held steady. According to HIRI, “Be prepared to market product categories that are most relevant to these project sizes, while products and materials used for larger, upscale projects may drop as these types of home improvement activities slow when looking at the market broadly.”

As a result of these findings, HIRI reported contractor optimism dipped again during the Q2, although it described the sector as “cautiously optimistic.” Roughly 50% of contractors surveyed anticipate market growth in the next 12 months, a percentage that is less than both Q1 and 2024 levels. Inflation, tariff pressures, rising materials costs and other economic concerns are adding to the mood of uncertainty among consumers and trade professionals.

When it comes to pinpointing specific areas of growth, contractors surveyed indicate energy efficiency and tech integration as trending opportunities in the home improvement sector. Roughly 44% of the contractors surveyed named these two areas as an important focus.  While materials costs have been slowly rising, consumers are still interested in ecofriendly materials and sustainable and green renovations, as those numbers increased slightly in Q2.

While many upgrades to outdoor living areas occurred during the pandemic, when consumers were forced to stay at home, spending on the category has not abated. Among the outdoor products that HIRI saw as gaining popularity in Q2 are landscaping supplies, stand­alone grills and/​or firepits, and exterior paint. “While such seasonal demand can be expected, we’re also seeing a modest shift toward exterior project investments in general,” the  Contractor Business Sentiment Tracker stated.

Naturally, one of the biggest challenges contractors are facing this year – as the Q2 numbers bear out – is the hesitancy among consumers to pull the trigger on starting a project. Cost constraints and timely payment also ranked high among contractors’ concerns, according to HIRI.  On the product side, contractors report that product availability has improved, along with wait times for delivery; however, “poor product quality and lack of product support” also increased.

To read the full Quarterly Contractor Business Sentiment Tracker for Q2 2025, click here.