8 Trends that Will Impact Contractor Business Sentiment in 2025

Track­ing the quar­ter­ly busi­ness activ­i­ty of home improve­ment pro­fes­sion­als will pro­vide valu­able insight into the indus­try and what lev­el of demand build­ing prod­ucts man­u­fac­tur­ers and sup­pli­ers can expect, based on the vol­ume and types of projects con­tribut­ing to con­trac­tors’ work­loads and the chal­lenges influ­enc­ing their pur­chas­ing con​fi​dence​.In gen­er­al, con­trac­tors have stayed rel­a­tive­ly opti­mistic through­out 2024, with con­cerns about inter­est rates wan­ing and a grow­ing hope­ful out­look for the home improve­ment mar­ket over the next 12 months. More than 75% of firms are pro­ject­ing rev­enue expan­sion dur­ing the upcom­ing year, accord­ing to our Con­trac­tor Busi­ness Sen­ti­ment Track­er for Q4 2024.This opti­mism does not come with­out cau­tion, how­ev­er, as mate­r­i­al costs, increas­ing com­pe­ti­tion, and prod­uct avail­abil­i­ty con­tin­ue to be issues that require adapt­abil­i­ty and strate­gic decision-making.

What Factors May Impact Contractor Business Activity in 2025?

Our research high­lights a vari­ety of the oppor­tu­ni­ties and chal­lenges fac­ing indus­try pro­fes­sion­als and how they relate to effi­cien­cy, pro­duc­tiv­i­ty and project time­lines, along with influ­enc­ing the lev­el of sat­is­fac­tion that con­trac­tors have with oth­er indus­try stake­hold­ers. Here are a few of the trends that emerged in 2024 and how they might influ­ence the indus­try out­look for man­u­fac­tur­ers and sup­pli­ers mov­ing for­ward into 2025:

1. Material Costs and Economic Concerns are Still Dominant Challenges

Mate­r­i­al costs and eco­nom­ic con­cerns were main chal­lenges iden­ti­fied by more than half of pro­fes­sion­al con­trac­tors in 2024. Addi­tion­al­ly, prod­uct avail­abil­i­ty and nat­ur­al dis­as­ters are emerg­ing con­cerns that have risen in inten­si­ty since the start of the year. Mean­while, inter­est rate fears are sub­sid­ing; dur­ing the last 6 months of 2024 only 1 in 4 con­trac­tors believed inter­est rates will have a sig­nif­i­cant impact over the com­ing 12 months, com­pared to 1 in 3 in the first half of 2024. Our research indi­cates that small­er firms are more impact­ed by infla­tion than larg­er firms — who also are bet­ter equipped to lever­age tech­nol­o­gy for effi­cien­cy in light of labor and mate­r­i­al avail­abil­i­ty challenges.

2. Competition Intensified in 2024 and Is Expected to Continue in 2025

Com­pet­i­tive bid­ding is increas­ing­ly chal­leng­ing, dri­ven by fluc­tu­at­ing costs and fierce com­pe­ti­tion among con­trac­tors. When asked, ​“How would you rate the change in com­pet­i­tive­ness in your mar­ket com­pared to a year ago,” between 20 – 27% of con­trac­tors not­ed the indus­try was ​“much more com­pet­i­tive” through­out 2024. A major­i­ty of con­trac­tors believe main­tain­ing com­pet­i­tive with bids and deliv­er­ing supe­ri­or cus­tomer ser­vice are the best ways to set their com­pa­ny apart with­in this high­ly com­pet­i­tive envi­ron­ment. There’s also been a grow­ing empha­sis on pro­vid­ing val­ue-added ser­vices, with 40% of con­trac­tors believ­ing that to be dif­fer­en­tia­tor in Q4 of 2024.

3. Product Availability Issues Place Strain on Pros

Through­out 2024, between 30 – 38% of con­trac­tors cit­ed prod­uct avail­abil­i­ty as a sig­nif­i­cant chal­lenge depend­ing on the quar­ter. Per­sis­tent sup­ply chain issues and chal­lenges with prod­uct avail­abil­i­ty and deliv­ery times can cause a strain on rela­tion­ships with man­u­fac­tur­ers and sup­pli­ers as well as Pros’ cus­tomers — home­own­ers. While some of the exter­nal fac­tors that exac­er­bate these issues are beyond the con­trol of build­ing prod­ucts man­u­fac­tur­ers and retail­ers, efforts can be made to help fos­ter sup­ply-chain resilience by encour­ag­ing exper­i­men­ta­tion with new prod­ucts and sup­pli­ers. HIRI research has con­sis­tent­ly found that when prod­ucts are unavail­able or incon­ve­nient to secure, this can mean a hit to brand loy­al­ty, espe­cial­ly for brands that con­tin­u­al­ly strug­gle to remain avail­able at the right time, in the right place.

4. Contractors Optimistic About Technical Innovations and Financing Access

Con­trac­tors report opti­mism in tech­ni­cal inno­va­tion, financ­ing access, and reg­u­la­to­ry con­di­tions, with all three cat­e­gories show­ing pos­i­tive sig­nals in 2024. Tech­no­log­i­cal inno­va­tions were deemed to have the great­est pos­i­tive impact on busi­ness over the next 12 months by rough­ly 2 in 3 Pros. Almost half of home improve­ment pro­fes­sion­als also believe that using tech­nol­o­gy is one of the best adap­tive strate­gies to address evolv­ing mar­ket demands and grow their busi­ness; oth­er meth­ods include offer­ing ser­vices or projects and improv­ing cus­tomer ser­vice. Man­u­fac­tur­ers and sup­pli­ers can cap­i­tal­ize on this by pro­mot­ing tech­no­log­i­cal solu­tions to align with con­trac­tors’ focus on sus­tain­abil­i­ty and inno­va­tion and advo­cat­ing scal­able, user-friend­ly tech­nolo­gies to enhance pro­duc­tiv­i­ty, with­out over­bur­den­ing contractors.

5. Keep a Watch on Labor Market Sentiments in 2025

Over­all Pros have expressed large­ly con­sis­tent labor avail­abil­i­ty chal­lenges through­out 2024, with about a third of con­trac­tors cit­ing that it’s ​“some­what or very dif­fi­cult” to find skilled work­ers, and anoth­er third feel­ing that it has been ​“some­what or very easy.” Chal­lenges with labor avail­abil­i­ty were con­sis­tent in out­pac­ing prod­ucts and mate­ri­als as the most sig­nif­i­cant chal­lenge expe­ri­enced by Pros in 2024. Fur­ther, 29 – 39% of con­trac­tors cit­ed the need for train­ing, depend­ing on the quar­ter. Address­ing this bar­ri­er can fos­ter pos­i­tive expec­ta­tions for future demand and rev­enue growth for remod­el­ers. Indus­try stake­hold­ers can encour­age work­force devel­op­ment through tar­get­ed train­ing to mit­i­gate labor short­ages as well as prod­uct inno­va­tion to reduce the skill lev­el need­ed to suc­cess­ful­ly install build­ing products.

6. Project Pipeline Stable in 2024

In gen­er­al, the project pipelines for home improve­ment pro­fes­sion­als have been sta­ble. Con­trac­tors are aver­ag­ing about sev­en home project areas quar­ter­ly in 2024, reflect­ing con­sis­tent demand across diverse res­i­den­tial spaces. Project activ­i­ty skews toward enhance­ment work, with end of year main­te­nance projects show­ing slight increase since the first half of 2024. Most activ­i­ty was con­cen­trat­ed in the $5K to $25K range across all quar­ters. Addi­tion­al­ly, kitchen and bath­room projects remain the top focus for home improve­ment pro­fes­sion­als, with gen­er­al­ists show­ing more diver­si­fi­ca­tion com­pared to specialists.

7. Contractors Test New Brands and Products to Adapt to Challenges

Our study shows that most con­trac­tors main­tain a steady pur­chas­ing pat­tern through­out the year, aver­ag­ing pur­chas­es across more than 11 prod­uct cat­e­gories on a quar­ter­ly basis, which indi­cates mul­ti-faceted project needs. Addi­tion­al­ly, near­ly half of con­trac­tors exper­i­ment­ed with a new prod­uct or brand this year — for the first time — demon­strat­ing will­ing­ness to switch brands and prod­ucts. This reflects an open­ness to change in order to deal with ris­ing prod­uct costs and mate­r­i­al avail­abil­i­ty issues. HIRI research con­tin­ues to find that pro­fes­sion­als are a lit­tle less like­ly to try a new sup­pli­er than they are to try a new prod­uct, under­scor­ing the impor­tance of devel­op­ing strong cus­tomer ser­vice, offer­ing diverse prod­uct lines, invest­ing in chan­nel strate­gies to secure space in favored retail­ers, and fos­ter­ing con­ve­nience to increase repeat customers.

8. Repeat Customers Provide Consistency

Our research shows that repeat clients slight­ly out­num­ber new cus­tomers for con­trac­tors, reflect­ing a sta­ble base of loy­al clien­tele. But cul­ti­vat­ing and engag­ing a strong cus­tomer base is an ongo­ing respon­si­bil­i­ty that demands tar­get­ed strate­gies, backed by research and insights. When it comes to the top sales and cus­tomer engage­ment chal­lenges faced by indus­try pro­fes­sion­als, gen­er­at­ing leads and man­ag­ing cus­tomer expec­ta­tions are the most sig­nif­i­cant. When look­ing to dif­fer­en­ti­ate them­selves, they must pri­or­i­tize qual­i­ty and rep­u­ta­tion — which are the two pri­ma­ry fac­tors cit­ed by clients when choos­ing a firm to work with. Any­thing your team can do to help posi­tion your offer­ings in a way that improves the qual­i­ty of install and rep­u­ta­tion of the Pro will be to your benefit.

Exploring Contractor Activity and Project Trends

To delve deep­er into the chal­lenges fac­ing con­trac­tors at dif­fer­ent project phas­es, as well as their cur­rent project back­log and future antic­i­pat­ed work­load, down­load our Con­trac­tor Busi­ness Sen­ti­ment Track­er for Q4 2024. This report also con­tains prac­ti­cal rec­om­men­da­tions for indus­try stake­hold­ers, includ­ing build­ing prod­ucts man­u­fac­tur­ers and sup­pli­ers, and fur­ther insights into the impact of broad­er eco­nom­ic trends, mar­ket con­di­tions, inter­est rates, and the over­all health of the hous­ing indus­try on con­trac­tors’ businesses.This study is part of the many research projects the Home Improve­ment Research Insti­tute con­ducts each year for its mem­bers. Not a mem­ber yet? You’re miss­ing out on unlim­it­ed access to over a mil­lion dol­lars’ worth of home improve­ment mar­ket research. Sched­ule a con­sul­ta­tion to find out more.