Practicing ArchitecturePracticing Architecture
Conditions Stabilizing, with Focus on Energy Efficiency
A full recovery is further off in the distance, as key homebuilding sectors remain weak
By Kermit Baker, Hon. AIA
AIA Chief Economist
Continued troubles in the housing market are limiting interest among homeowners in special features, advanced systems, and upscale products. Other than outdoor living areas and home offices, few special function rooms are attracting attention. The few special features that are increasing in popularity focus almost exclusively on energy efficiency or accessibility. Increasing energy efficiency was the common theme of popular systems and technologies this quarter, although wireless telecommunication systems increased sharply in popularity as well. Likewise, the most popular home products are generally ones that promote energy efficiency or require little maintenance.
Business conditions for residential architects show signs of stabilizing, but have not yet begun a meaningful recovery. Billings at residential firms were stable in the second quarter compared to first-quarter levels. Firms in all regions but the West reported very modest improvements in billings in the second quarter, and backlogs–the amount of design work sitting in-house–have been trending up slowly in recent quarters. And while the home improvement market remains a healthy source of work for residential architects, key segments of the construction market (namely entry-level homes and trade-up homes) have deteriorated from where they were a year ago. Homes at the lower end of this price distribution are bellwethers for the broader housing market, because a healthy housing recovery will depend on younger households looking for affordably priced homes as they enter the housing market.
These are some of the key findings from the AIA’s Home Design Trends Survey for the second quarter of 2011. These results come from a panel of about 500 residential architecture firms that comment on trends in consumer preferences in the markets they serve.
Weak market discouraging additional rooms and features
House prices have not yet stabilized in many areas of the country, and as a result, households are nervous about overextending themselves. As such, special function rooms have not generated much recent interest. There are a few exceptions to this general trend, however. Demand for home offices for telecommuting remains strong. Outdoor living space has remained healthy even in the face of the housing downturn. Trends toward informal lifestyles, as well as more home-centered activities, have helped maintain interest in outdoor living areas. Mud-rooms are another space that has continue to remain popular (Figure 1).
The share of respondents who have indicated growing popularity for these three spaces and function—outdoor living space, home offices, and mud-rooms—has significantly increased over the past year. For two additional uses of space–au pair or in-law suites and hobby or game rooms–consumer interest has essentially held steady over the past year (Figure 2). Most other special function rooms have seen substantial declines in interest over the past year, including interior greenhouses, media rooms/home theaters, pet rooms/interior kennels, storm rooms/safe rooms, kid’s wings/guest wings, and exercise rooms.
Similar to trends in special function rooms, special features in homes are being reevaluated. Currently popular special features generally fall into one of two areas: energy efficiency or accessibility. Features as simple as extra insulation or using alternative insulation techniques remain very popular. For each, around 70 percent of respondents see these features as increasing in popularity.
Features that promote accessibility for less mobile users have also retained their popularity. Master bedroom suites on the first floor, easy-to-use handles and faucets, and even more expensive features like ramps into the home and elevators are generally rated as increasing in popularity (Figure 3).
Emerging systems and products
Growing reliance on technology is influencing consumer choices in the home. Many of the most popular home systems deal with energy efficiency: energy management systems, geothermal heat pumps, and solar panels. Use of these technologies is still relatively rare, but becoming more common. Given the popularity of home offices, wireless communication devices top the list of systems increasing in popularity, a trend that has been accelerating in recent years, even as homeowners reduce the number of special features in their homes (Figure 4).
However, other emerging technologies have not yet developed much in terms of consumer adoption. For example, interest in electrical docking stations for cars is still in a nascent stage. Central audio systems, automated lighting controls, and air purification systems are other technologies with limited interest at present.
The second quarter survey also asked residential architects to comment on consumer interest trends for home related products. In general, products promoting energy efficiency or other sustainability objectives remain popular, as do low-maintenance products. At the top of the list are energy efficiency products such as high-performance windows. Tankless water heaters, water-saving and conserving devices, and reclaimed or salvaged materials were also on the list.
Low-maintenance products and materials also remain very popular. In particular, synthetic or engineered products for flooring, siding, or decking are being adopted especially widely (Figure 5). But sustainable products did not score well universally. Heat-generating stoves (such as those using pellets) are declining in popularity, and automated window shades also drew mixed consumer interest.
Business trends continue to be challenging
Conditions in the broader housing market are beginning to stabilize nationally. Business conditions at residential architecture firms likewise have shown signs of stabilizing, but just as many firms are reporting declining billings as are reporting increases. The residential firm billings index score in the second quarter was 50, indicating no change in billings overall compared to the first quarter. In the first quarter, the billings score was 51, indicating very modest gains. However, this index is not adjusted for seasonal variation, so this relative stability may just be reflecting normal seasonal fluctuations in firm workloads (Figure 6).
Billings stabilization at residential architecture firms has allowed project backlogs to recover a bit. Backlogs were sufficient to cover staff for four to five months during the last housing boom. However, they fell to below three months by early 2009, and have generally stayed in the three-month range since then. As of the second quarter of this year, backlogs averaged 3.2 months, matching their highest level since late 2008, although seasonal patterns in backlogs may play a role (Figure 7).
The general stabilization seen in business activity at residential architecture firms is reflected across the four major U.S. Census regions. In the second quarter, firms in three of the four regions–the Northeast, Midwest, and South–were all reporting modest billings increases. Firms in the West were still reporting mild declines, and business conditions at firms in the West have generally been a bit weaker during the downturn than in other regions. One reason for this is that the West contains some of the nation’s most overbuilt markets filled with vacant properties, such as Las Vegas, Phoenix, Riverside-San Bernardino, Calif., and Sacramento (Figure 8).
All major new construction sectors remain weak at present, according to residential architects. Second and vacation homes, as well as townhouses and condos, continue to be weakening market sectors. Most notably, homes aimed at first-time buyers and trade-up buyers have deteriorated the most over the past year. A year ago, these two sectors looked to be moving toward recovery. Over the past year, the share of respondents classifying these two sectors as weakening has increased, and the share classifying them as improving has declined (Figure 9). Most analysts feel that a sustainable recovery in the housing industry needs to begin at the lower end of the market, because an influx of entry-level buyers will begin to put pressure on the other higher end housing segments.
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