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Homeowners Prefer Neighborhoods with Greater Accessibility to Transportation and Commercial Opportunities

High equity levels keep home improvement activity healthy, despite continued easing of residential construction market. 
 
Washington, D.C., December 13, 2006 — Escalating energy costs, a preference for urban living, and a desire for greater accessibility to public services, retail and entertainment options has resulted in more community design based around the principles of higher density and mixed-use development. Homeowners have also expressed interest in neighborhoods with dedicated areas for recreation and open space. Traditional neighborhood design featuring homes closer to the street, front porches for more neighborhood interaction, and smaller lots are also increasing in popularity according to The American Institute of Architects (AIA) Home Design Trends Survey from the third quarter of 2006.

“Encouraging clustered retail development with a multitude of services around public transportation and dense residential units has been part of an overall strategy by architects and public officials to foster more vital and healthy communities,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Consumer demand has caught up to this approach and we are now seeing more interest in developments that include a mix of shopping, entertainment, and recreation options.”

AIA Housing Committee chair, Katherine Austin added, “The advantages of mixed-use development not only make life more convenient, they also help create more vibrant and active communities that reflect the preferences of changing demographics. There are added environmentally friendly elements associated with such design, neighborhoods become more walkable and allow for less reliance on the automobile for short shopping trips.”

AIA Center for Communities by Design Resources for Livable Communities

The sagging housing market has led to a continued slowing of business conditions at residential architecture firms, with an even greater easing of inquiries for new work pointing to further slowdown in residential design activity in the quarters ahead. Virtually all new residential construction sectors are reported as weakening, but homeowners are still investing in their current homes, as kitchen and bath remodeling projects as well as additions and alterations are reported by residential architects as very strong.

AIA Home Design Trends Survey Highlights

Upscale Features Popular for Home Exteriors (percentages represent number of respondents noting an increase in demand minus those reporting a decrease)

• Durable exterior materials: 73.3%
• Accent lighting: 49.5%
• Windows (number and size): 47.6%
• Porches: 45.9%
• Upscale entry doors: 42.1%
• Homes closer to street : 24.1%
• Contemporary styles: 7.8%

Housing Market Business Conditions

The slowdown in the broader housing market continues to be felt at residential design firms. Third quarter billings increased only modestly, as fewer than 30% of firms reported an increase over the second quarter, while 17% reported a decline. Inquiries for new projects are weaker than billings and were well below the levels of a year ago, indicating that the residential design market has likely not hit bottom yet. When it occurs, an increase in inquiries should signal a turnaround in residential design activity.

Despite the weakness in residential construction, remodeling activity remains strong. About half of residential architects report remodeling to be strengthening in the markets that they serve, while fewer than 10% report weakening conditions. A high number of homeowners have built up a lot of equity in their home that can be used to finance home improvement projects. Even with home prices softening in many markets, the more than 50% increase in prices nationally over the past five years has given owners the ability as well as incentive to reinvest in their homes.

Specific Construction Segments (index score computes as % of respondents reporting improving minus those reporting weakening conditions)

• Additions / alterations: 46%
• Kitchen and bath remodeling: 43%
• Townhouse / condo market: 8%
• Second / vacation home market: -1%
• Custom / luxury home market: -8%
• Move-up home market: -14%
• First-time buyer / affordable home market: -30%

About the AIA Home Design Trends Survey

The AIA Home Design Trend Survey is conducted quarterly with a panel of 500 architecture firms that concentrate their practice in the residential sector. Residential architects are design leaders in shaping how homes function, look, and integrate into communities and this survey helps to identify emerging trends in the housing marketplace. Business conditions are also monitored on a quarterly basis. The next survey will focus on and kitchen and bath trends (February 2007).

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