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Housing Recovery Means Architects Demand

Today, architects no longer need to suffer from layoffs and desperate search for the clients. The hard times of crisis in real estate industry have been left behind.

Housing Recovery

Business conditions in the construction industry have generally been improving over the last several months,” comments Kermit Baker, AIA Chief Economist.

A stream of new buyers creates demand for the architect services, making architecture a safe career field. The Architecture Billings Index demonstrates that business conditions at architecture firms are constantly improving. The index is based on 700 firms’ surveys asking whether billings are up or down during the month. A score of 50 means that bills are flat, any number lower means decline while any number above 50 demonstrates the growth. So, according to this measuring, 2013 has witnessed a solid growth of architecture demand with the average index of 54,9.

Another data shows the same dynamic. Each month, Trulia’s Housing Barometer makes a research on how quickly the housing market is returning back to normal levels. Thus, during 2013 the construction starts have increased and now make up 41% of the normal pre-bubble levels. Single- and multi-family starts have risen by 20% and 33% respectively. Existing home sales have grown to their second-highest level in the last six years and now are 94% back to normal. The foreclosure rates have dropped to 9, 23% – this is the second-lowest level in last 5 years. The rate is 56% back to pre-bubble level.

Architects expect a significant rise of demandThe image is the courtesy of crainsnewyork.com

Rising billings are seen to be an impulse for future construction activity and rising demand for design architecture. Moreover, architects expect a significant rise of demand for their services from the public sector and non-profit organizations as well as medical centers and colleges.

According to the Bureau of Labor Statistics latest report, the architectural and engineering sector has added a total of 27,400 jobs within this year. The biggest demand has been noticed in the move-up homes, luxury houses and home improvement markets.

Four Stages of Housing Recovery

Four Stages of Housing RecoveryThe image is the courtesy of newsobserver.com

Some analytics say that today housing market is on the third stage of recovery process:

  • The first stage began in 2009 when the free fall of the housing market ended, and the construction process renewed its development.

  • The second stage began in 2012 when the home prices felt to the lowest level and, then, started its long way back to normal.

  • Now we are on the third stage of the housing recovery which began in spring 2013 with the mortgage rates’ rise in May. Existing-home sales and prices have returned to almost normal level.

  • The fourth stage will probably begin in few years when young people will start moving out of their parents’ homes.

Until this happens, the home prices and mortgage rates will remain below their normal levels.

We still have a lot of young people that are going to start moving out and forming households and we’re going to have to find housing for them,” notes Patrick Newport, the chief United States economist for IHS Global Insight.

The Growth Has Spread to Almost All Residential Sectors

Residential architects are reporting improvement for almost all major residential sectors. Today households invest with more confidence in outdoor facilities and larger homes. The market for move-up homes and home improvement is heating up, while the first-time buyers’ and second home markets just start to enter into a stable phase.

The Growth Has Spread to Almost All Residential SectorsThe image is the courtesy of vancouversun.com

Anyway, despite the rising mortgage rates and other economic difficulties, business conditions at architecture firms have achieved their strongest growth levels since the time of the financial bubble. Below we present the level of the architect demand depending on the residential sector:

It Is Still Tough for the First-Time Buyers to Buy a Home

The first-time buyers’ market was the first sector to turn down during the recent housing recession because of the rocketing growth of home and land prices. Today, it still remains difficult for first-time homebuyers to buy a property. The reason is quite simple. Traditionally, the first-time buyers are more likely to be young couples with established career and savings necessary to make a purchase.

It Is Still Tough for the First-Time Buyers to Buy a Home

The image is the courtesy of lindenlanellc.com

But, it appears that now there is a huge group of first-time buyers who were not able to buy property during the recent housing crisis. Most of them have lost their job or have debts and can’t buy home even now, with the favorable conditions. Estimations show that about 15-20% of new-home buyers are people over 35 years old.

Despite the financing difficulties and limiting credit availability of the first-time homebuyers, residential architects report that the affordable home market has been doing better. Thanks to higher house prices and the positive effects of government housing finance programs, nowadays fewer homeowners are “underwater” or do not need to pay mortgages at all. So, if this positive dynamic continues, it is possible that in few years the prices will stabilize, and it will become more affordable for the first-time buyers to make a purchase.

Growing Buyers’ Market Creates Additional Architects Demand

Move-up homes’ market has seen more improvements. An increasing number of move-up buyers are selling their current homes in order to buy something pricier and comfortable, as well as to take advantage before the mortgage rates rise.

According to RealtyTrac data, nowadays about 40% of all home owners have at least 20% or more of the equity in their homes.

The estimates show that the demand for architects in designing move-up homes increased from a score of -3 in 2012 to 32 in the first quarter of 2013. Higher home prices help the economy not just by strengthening the construction and real estate business, but by making homeowners feel wealthier and more willing to spend money. While a lot of Americans lost the equity in their homes during the housing crisis, the recent home prices have helped a number of move-up home buyers to regain the previous loss.

The Custom/Luxury Market Is Predicted to Grow Up in Definite Areas

Luxury Market Is Predicted to Grow Up in Definite AreasThe image is the courtesy of luxuryrealestatemonaco.com

The custom/luxury market has also seen some positive changes. The estimates show that the overall demand for architects in designing luxury homes jumped from a score of -2 in 2012 to 16 in the first quarter of 2013.

Most of the new construction is happening in the luxury or high-end segment,” notes Barika Williams, policy director at the Association for Neighborhood and Housing Development.

This trend is particularly typical for such cities, as New York, Los Angeles, Miami, etc., where the influx of tourists and higher living standards dictate the rise in development of luxury residential constructions.

The Townhouses/Condos Market Is Witnessing an Overall Growth

Over the last years, the condo market has witnessed an overall growth and strengthening. However, this trend depends on the region, and there are still a lot of areas across the country with the overbuilding of condos that slow the recovery in this sector.

Condos Market Is Witnessing an Overall Growth

The image is the courtesy of 56leonardtribeca.com

For example, New York and Miami are now witnessing a condo boom. The Miami market is definitely on the rise and the latest figures clearly indicate that now is the best time to invest in local real estate, especially, the multifamily condos’ construction. The similar situation is in New York, where the need of new condos has created a strong demand for a new construction boom.

The Second Home Market Is Going through Bad Times

The Second Home Market Is Going through Bad TimesThe image is the courtesy of espacios-urbanos.com

The second home market is still suffering. As the second homes and vacation homes are more often purchased with a profitable investment goal in mind, it results in the low purchasing power of this kind of property. The situation is predicted to be the same until a stronger recovery in home prices.

The Home Improvement Market Is on the Rise

The Home Improvement Market Is on the RiseThe image is the courtesy of elocal.com 

The home improvement market seems to be the most successful one. Most of the home improvements are made with cash, that is why the limiting credit abilities don’t have any effect. Because of the foreclosure crisis (according to statistics, more than a million homes a year), a lot of homes now need to be repaired and improved by the seller before the closing a deal. Moreover, an increased interest is expressed in blending indoor and outdoor spaces.

The Home Design Trends Survey reflects the key characteristics of current architecture and home design, such as:

  • Rebound in home sizes: open-space layouts and partial wall divisions, merging kitchen into living areas (see the graph)
  • The single-floor design remains the most popular option
  • Home lot sizes tend to decrease (see the graph)
  • In-home accessibility remains the key architectural feature (see the graph)
  • Focus on amenities and outdoor space improvements
  • Landscape architecture is growing in popularity

The American Institute of Architects’ (AIA) Forecast makes bright prognosis for the architect demand and overall economic conditions for development of new construction projects in 2014. AIA Chief Economist, Kermit Baker, has noted:

Optimism for a stronger performance next year is based on the recent increase in domestic energy production, the boost to the general economy from a resurgent housing market, and improving employment figures that should help drive demand in the design and construction sectors.


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