New project inquiries at residential architecture firms down 24% in 2Q: AIA

Residential architects reported a 33% drop in new project inquiries in the second quarter of 2010, according to the American Institute of Architects (AIA) national billing index. AIA conducts a quarterly survey of 500 architecture firms and creates a billing index for the businesses. In the second quarter, new inquiries scored a 47, down 24% from the 62 scored in the first quarter. New inquiries remained at the same level measured a year ago. Billings in the second quarter dropped 18% as well but remain above levels seen last year. Kermit Baker, the chief economist at AIA, said business conditions at architecture firms hit an all-time low in 2008 but had been making a steady recovery to the first quarter of 2010, when these companies reported the first increase in billings in nearly three years. But business dropped since, and Baker pointed to a softening economy and the end of the homebuyer tax credit. “In all likelihood, the softening of firm billings at residential architecture firms reflects the general weakness in the economy during that quarter,” Baker said. “Additionally, the home buyer tax credit expired at the end of April, which encouraged many buyers to accelerate their buying plans. This has produced weakness in the housing market since the April deadline.” The backlogs of projects kept in-house at these firms has fallen to three months from the average four or five before the downturn of the housing market. One month of backlogged projects shows that a firm can keep its staff billable without new business for that amount of time. But while new projects are down, Baker said home improvement activity is growing at a healthy rate. Kitchen and bath remodeling projects have increased more than 20% in 2010. “Without an overbuilding problem like in the new construction market, home improvement activity has been able to stage a healthier recovery than new construction,” Baker said. Write to Jon Prior.