Architect Deal Flow Drops as Homeowners Shun New Builds and Pick-Up DIY Projects

As a perceived market recovery remains fragile and open to another dip, especially if the homebuyer tax credit is not extended past the April 30 deadline, residential architects reportedly billed fewer clients in 2009, according to a new survey from the American Institute of Architects (AIA). AIA surveyed 500 architecture firms, and scored the results in an index. In 2009, the billing category scored a 32, down from a 36 in 2008. A score above 50 is considered a positive sign. Homeowners, instead of looking at new builds to purchase and/or big refurbishment projects, are turning their attention more toward remodeling and alterations on their own, in ways that save on costs. Home Depot (HD), which reported a $342m in its fourth quarter ending Jan. 31, 2010, said its sales performance was driven by gains in kitchen and bath, paint, flooring and plumbing, for example. However, these gains could also come from those operating on the default side as investors, brokers and property preservation companies improve foreclosed homes for resale. “It’s still too early to think the residential market has fully recovered, but there are two encouraging signs – overall business conditions are far better than they were a year ago at this time, and we are seeing improvement in those housing sectors that need to lead a broader improvement in the housing market: remodeling and alterations of existing homes, and at the entry-level of the new construction market.” said Kermit Baker, AIA chief economist. Baker added that homeowners are moving away from “glitzy features such as steam showers and towel warming drawers/racks” and are looking to make improvements that will cut utility costs. Water-saving toilets, radiant heated flooring and LED light options are increasing in popularity. Despite the drop in business on the design side, other sectors in the origination sphere are showing signs of improvement. The luxury homebuilder Toll Brothers (TOL) reported narrowed losses for its fiscal year first quarter that ended Jan. 31, 2010. Farther down the origination pipeline, borrowers filed 14.6% more mortgage applications in the week ending February 26, according to the Mortgage Bankers Association (MBA). However, these recent gains could be balancing on the cusp of another drop in prices, which could occur after April. “[T]he housing market is likely to falter once the tax credit expires this spring, leading to a double-dip in prices,” said Paul Dales, the senior US economist at Capital Economics. Dales linked home construction dealflow to home prices. The housing boom in the US, he said, encompassed residential construction – not just prices. An executive of a regional homebuilder in the Southwest told HousingWire that business will drop once the tax credit expires but expects, and is hopeful for, an extension. Write to Jon Prior.

3d rendering of a row of luxury townhouses along a street

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