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Turnaround in Home Sizes, In-Home Amenities, and Property Enhancements
Residential architects report the most improvement in business conditions since the beginning of the housing downturn
By Kermit Baker, Hon. AIA
The long and steep housing downturn appears to be coming to an end. Residential architects are reporting that home sizes are beginning to turn around, particularly for custom and luxury homes, as well as in the market for additions to existing homes. Making homes more accessible for an aging population and using the space more flexibly are key home design considerations. Lot sizes remain under considerable pressure, although this may be easing. Outdoor living remains popular, and with that has come more interest in property enhancements such as low-irrigation landscaping.
These are some of the key findings from the 2012 first-quarter AIA Home Design Trends Survey. With the easing of market conditions, residential architects are reporting better business prospects. Favorable seasonal trends pushed up billings at residential architecture firms, which are now showing the strongest growth in six years. More significantly, business conditions are improving in each of the major regions of the country, indicating a broad-based recovery. While the strongest sectors continue to be improvements to existing homes, stability is developing in key new construction sectors for custom and luxury homes, trade-up homes, and even entry-level homes.
Home sizes bottoming out
After exploding during the housing boom, the sizes of new homes peaked and began to decrease during the housing downturn. Beginning in 2006, fewer and fewer residential architects were reporting that home sizes were increasing. There was a modest increase in the share reporting homes getting larger in 2011, and a larger increase with the 2012 survey. Similar trends hold for home volumes (ceiling heights, two-story foyers, etc.). With the bottoming-out of home sizes, volumes also appear to be trending up, since 20 percent of respondents report volumes to be increasing, while fewer than 15 percent report them to be decreasing (Figure 1).
Home sizes seem to be turning around in some building sectors faster than others. Only 8 percent of respondents report that overall home sizes are increasing, but 13 percent say that more expensive upper-end homes are increasing in size. Likewise, 30 percent of respondents report that upper-end homes are continuing to decrease in size, compared to 42 percent overall.
Additions and remodels are reported to be increasing in size at an even higher rate than new construction. Fifteen percent of respondents report these improvements to be increasing in size, compared to 25 percent reporting them to be decreasing (Figure 2).
Home layouts favor accessibility
In an effort to appeal to as broad a population as possible, in-home accessibility (e.g., wider hallways, fewer steps) is the home layout trend increasing the most in popularity. Almost two-thirds (64 percent) of respondents feel that this feature is increasing in popularity, while less than 1 percent feel that it is decreasing. Features that allow better access into and out of the house (ramps, on-grade entrances) also grew in popularity. Almost half of respondents feel it is increasing in popularity, and fewer than 2 percent feel it is decreasing.
Open space layouts in the home with flexible floor plans also continue to increase in popularity. Over half of respondents (55 percent) indicate that open space layouts, as opposed to separately defined and enclosed rooms, are increasing in popularity. A somewhat related trend is that over half of respondents report that informal space in the home is increasing in popularity (Figure 3).
Property enhancements continue to flourish
While changes in home sizes have been driven by the housing cycle, lot sizes seem to be in a longer-term downturn. Even back in 2006 at the peak of the housing boom, only 7 percent of respondents reported lot sizes to be increasing, while over 40 percent reported declines. While holding at about that pace through 2008, the share reporting larger lot sizes dipped even further to just 2 percent of respondents from 2009 to 2011.
This year’s survey showed a modest bounce back in the share reporting lot sizes to be growing. Still, almost a quarter of respondents (24 percent) reported sizes to be declining. With the pressure on home prices during the downturn, reducing lot size was a popular option. While sizes are likely to stabilize as the market picks up, it is unlikely that they will increase. High land costs, greater emphasis on infill locations, and limited interest among homeowners in maintaining a large yard all point to modest lot sizes in the years ahead (Figure 4).
Even without increases in lot sizes, households are continuing to pursue property enhancements. The 2012 survey shows that interest in outdoor living space increased, with almost two-thirds of respondents indicating that outdoor living space, covered outdoor space, and outdoor rooms are increasing in popularity. However, the outdoor feature that residential architects report as showing the greatest increase in popularity is low-maintenance, low-irrigation landscaping. Almost two-thirds of respondents indicate that this trend is increasing in popularity, which is roughly the same level of interest seen over the past several years.
Low-irrigation landscaping promotes sustainability, as do other popular property enhancements. Rainwater catchment systems and gray water reuse are reported as popular outdoor features. Green landscaped fencing options (bushes, trees, hedges) are also popular and sustainable ways to maintain privacy with a smaller lot.
Many residential architects also report that preparing building lots for construction has become more difficult due to topographical or soil conditions, or zoning limitations on the site. Though there is no point of reference since this was not asked in previous surveys, over 40 percent of respondents indicated that this concern was increasing (Figure 5).
Business conditions improving
As the housing market continues to move into recovery, business conditions at residential architecture firms are improving. For the first quarter of 2012, 35 percent of participating residential firms reported that their billings had increased over the fourth quarter of 2011, while just over 22 percent reported that they had declined. The remaining 43 percent reported that they were essentially flat over this time period.
This was the strongest uptick in billings in almost five years, since the second quarter of 2007. However, because these billings numbers are not adjusted for seasonal variation, it’s difficult to compare quarter-to-quarter changes. The first quarter of the year normally brings with it an upturn in residential design activity, and no doubt the unusually mild weather in many parts of the country has inflated residential construction activity, and therefore design billings. Second-quarter billings figures will likely provide a better reading, which hopefully will remain positive because new project inquiries have increased (Figure 6).
One sign of improved business conditions is the project backlog at firms. Measured as the amount of time that projects currently in-house could keep current staff employed, average backlogs fell to under three months on average in 2009 and 2010 before beginning a slow upward drift in 2011. In the first quarter, backlogs fell off to 3.4 months, down from the fourth quarter of 2011 but above the average of the past few years. Backlogs remain well below their levels during the housing boom (Figure 7).
Residential design firms in all regions of the country reported improved business conditions in the first quarter. The greatest improvement came from firms in the Northeast and Midwest. For firms in the Northeast, the average billings score rose to 54.2 from 47.7 a year ago, and 40.8 in the fourth quarter of 2011. (Any score above 50 signifies growth, and any score below 50 signifies decline.) Firms in the Midwest also reported strong gains, to 58.0 from 52.9 a year ago and 47.2 in the fourth quarter of last year. Since the strongest gains in billings came from areas where unusually mild weather was more pronounced during the first quarter, it appears that first-quarter figures may overstate underlying improvement in the industry (Figure 8).
Improvement occurring in key residential sectors
Residential architects are in the unique position of being able to report the relative strength of multiple sectors of the housing market. Typically, certain housing market sectors turn up (or down) before others, giving a sense of the future direction of other sectors. During the last downturn in 2005, the first-time-buyer market began to weaken before the rest of the market, while the custom/luxury market remained relatively healthy into 2007. The same pattern may appear as the housing market recovers.
However, in the first quarter the custom/luxury market is reporting the best conditions, with the share of respondents reporting improved conditions almost equal to those reporting weakening conditions. This no doubt reflects tightening credit standards and the difficulty faced by moderate-income households in obtaining financing for more affordable homes. Fortunately, conditions for trade-up and entry-level housing are close behind, holding open the possibility of a broader housing upturn in the coming quarters. This upturn has already come to the home improvement sector, as residential architects report both remodeling projects and additions and alterations as very strong (Figure 9).
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