The Remodeling Market Is Still Growing — Just Slower. What Smart Contractors Are Doing Differently

Two years ago, a missed follow-up didn’t matter. Another homeowner was already calling. That buffer is gone, and contractors still running on pandemic-era habits are watching leads go to competitors with tighter operations. 

Homeowner renovation spending is still projected to reach $518 billion this year. Half a trillion dollars is moving through the market. But the year-over-year growth rate is sliding from 2.1% at midyear to 1.6% by December, with Harvard’s Joint Center projecting just 0.5% growth by early 2027. Every point of deceleration tightens the competition for the work that remains. 

Ryan Smith, owner of Cinch Home Buyers, a North Carolina property acquisition and renovation firm, sees the shift in his day-to-day operations. “Demand has definitely been going down,” Smith says. “I’ve been able to hire a lot easier and I’ve been able to get better quotes when it comes to hiring subs. Permits are taking a lot less time than they were before.”

Easier hiring and faster permits sound like good news. They’re also signals that the contractor pool is competing for less work. The ones pulling ahead right now are competing on how they run the business, not on the type of work they bid.

The remodeling market is cooling, not contracting

The Remodeling Market Index peaked at 87 in late 2021. It sits at 62 now. That’s still positive territory, but a long way from where it was. The Future Indicators Index dropped to 54 in Q1, with leads and backlogs both softening.But  91% of homeowners say they’ll move forward with renovations this year, and NAHB forecasts activity up 3% in 2026. The work is there. The easy version of getting it is not. 

“A lot of homeowners are doing less pricey things,” Smith says. “They’re more focused on trying to get the best bang for their buck.”

The market that rewarded nearly everyone for showing up is becoming one that rewards the operators who run the tightest ship. And most of the adjustments that matter have nothing to do with the type of work you’re bidding.

Your systems are your competitive advantage now

When demand was hot, operational inefficiency was invisible. Jobs came in faster than most contractors could schedule them, so a sloppy intake process or inconsistent follow-up didn’t cost you anything. Now those gaps show up in your close rate.

“Systems, processes, the team that you have around you. That’s what separates successful contractors from those who are struggling right now,” Smith says.

Homeowners are saying the same thing. Among homeowners who completed renovations in 2025, 44% said they would have liked better schedule tracking, 35% said clearer communication, and 26% said they wanted greater cost transparency.  Disorganized operations are costing contractors more clients than bad tile work ever did.

When asked if his company is becoming more selective about the projects it takes on, Smith reframed the question. “We’re not more selective on projects,” he says. “We’re being more selective with our systems and more selective with our processes so we can expand.”

Selectivity in a tightening market often means taking fewer jobs and hoping the right ones come in. What Smith describes is the opposite: building the operational infrastructure that lets you take on more work without the quality or margins breaking down.

Your move: Audit one operational bottleneck this week. Where do leads stall between first contact and signed contract? Where does communication break down during a project? The answer is almost always a process gap, not a personnel problem.

Technology is where market share is moving

When asked where he sees the biggest opportunity for contractors over the next few years, Smith doesn’t hesitate. “Definitely in technology,” he says. “I think the people that are not investing in it are going to lose some market share.”

The shift is already measurable. AI adoption among contractors doubled in a single year, from 17% to 38%. Most of that adoption is landing in cost estimation and budgeting (24%) and bid management (22%), the functions where speed and accuracy directly affect close rates and margins.

Smith’s company went a step further. Instead of stacking third-party subscriptions, his team built their own CRM, automated texting system, and dialer, bringing the entire tech stack in-house. “It’s a lot less overhead now as far as software cost,” he says. Not every contractor has a dev team, but the principle applies at any scale: consolidate your tools, automate the repetitive work, and stop paying for platforms you’re only half-using.

Most contractors are still behind. Only 20% of contractors operate on a single integrated platform. The rest are running fragmented systems that leak efficiency at every handoff: data entered twice, follow-ups that slip through the cracks, billing cycles that drag on because field data doesn’t flow into invoicing. Every one of those gaps costs money. In a market where margins are tighter, that adds up fast.

Your move: Pick one workflow that’s still manual, like lead follow-up, appointment reminders, or estimate delivery, and automate it. You don’t need a custom build. A CRM that sends an automatic follow-up text after every inquiry closes more leads than the contractor who calls back “when I get a minute.”

Retention is cheaper than acquisition

Finding new customers costs more than keeping existing ones. In a market where lead volume is softening, every lost client relationship hits harder.

“Churn rate is the biggest thing,” Smith says. “You want it as low as possible so it’s not like a revolving door where it costs more and more for marketing.” His company manages the customer experience through automated SMS updates and proactive outreach from a transaction coordinator, making sure clients don’t go silent between milestones.

Ninety-three percent of homeowners planning 2026 renovations intend to hire professionals. But “hiring professionals” is a low bar. Referrals and repeat business come from making the process feel organized, communicative, and predictable. 

That’s especially true in a market where 79% of renovating homeowners are choosing to stay in their current home and 45% consider it their forever home. These homeowners will need more work done in the future. The question is whether they’ll call you back.

Your move: Set up automated project updates for every active job. Even a weekly text or email with a one-line status makes a difference. Clients who feel informed don’t call to check in, don’t get anxious, and don’t leave bad reviews.

Financing expands your addressable market

Rising material costs are the top concern on both sides of the transaction. Sixty-three percent of homeowners cite rising product and material costs as their biggest renovation challenge, and 36% say having financing in place was the trigger that let them start their project. When the total price is the obstacle, monthly payments are the answer.

“If you’re able to provide financing to clients, then 100% you’re looking at a massive ease of getting more projects,” Smith says. “You’re opening a bigger market share for yourself.”

Platforms like Acorn Finance make financing easy to offer. Your customers compare real loan offers in minutes, and you get paid upfront while they spread payments over time.

Financing is a tool that lets contractors access the full depth of demand, including homeowners who want the work done but need the payment broken into manageable pieces. Every project you can convert from “maybe later” to “let’s go” protects your pipeline. 

Your move: Add a monthly payment line to every estimate, next to the project total. Don’t wait for the homeowner to ask about financing. Present it as part of the decision framework from the start.

Build the business that wins in a slower market

You don’t need to fix everything at once. Start with one process gap this week and build from there: 

This week: Pick one operational gap (intake, follow-up, estimating speed, project communication) and fix it. Don’t try to overhaul everything. One process change that sticks is worth more than a strategic plan that doesn’t.

This month: Evaluate your tech stack. List every software tool you’re paying for and how often your team actually uses it. Cut what’s redundant, consolidate where you can, and automate one manual workflow: lead response, appointment confirmation, or post-job review requests.

This quarter: Add financing to your standard estimate presentation and set up an automated client communication cadence for active projects. Measure your close rate and your repeat/referral rate at the end of 90 days. Those two numbers tell you whether your operations are getting tighter or just busier.

The bottom line

The remodeling market still has more than half a trillion dollars moving through it. But the pace that papered over inefficiency is gone, and contractors who built their growth on volume alone are feeling it first. Smith’s advice for this market is simple, but effective: “Learn as much as possible about systems, processes, and the new tech that’s coming out so you can position yourself.” The work is still there. How you run the business around it determines whether you keep it.

Ready to close more of the projects you’re already quoting? When homeowners hesitate at the total, Acorn Finance lets them compare real loan offers in minutes, turning a $40,000 renovation into a monthly payment they can say yes to. You get paid upfront while homeowners spread payments over time. See how contractor financing works.