A strong housing market has generated favorable business conditions for architecture firms working in the residential sector. Overall, 44 percent of these firms indicated that their overall billings increased by 5 percent or more during the first quarter of 2005, while only 10 percent reported declines from the fourth quarter of 2004 of that magnitude. There are no signs of a slowdown, as more than half of firms report that inquiries for new work also increased during the first quarter of the year.

The typical firm working in the residential sector has more than five months of project backlogs in house. This means that without any additional projects, the typical firm has sufficient work under contract necessary to keep their entire staff fully employed for the next five to five and one-half months. More than a quarter of the firms surveyed have six or more months of work in-house. Since many residential projects have relatively short design periods and tight schedules, these backlogs are quite significant.

Remodeling projects and condo construction strongest
Not all sectors of the residential market are performing as well as others. About half of all firms rate the remodeling market—both additions and alterations to existing structures and kitchen and bath remodeling—as improving over the first quarter of 2005, with only about 5 percent of firms reporting each of these sectors as weakening. The condominium and town house market was equally strong, with more than half of firms reporting improving conditions for these units.

Move-up homes, custom/luxury homes, and second homes/vacation homes were rated as the reasonably strong residential sectors. Each of these sectors had two to three times as many firms rating them as improving as compared to the share rating them as weakening. The only sector not showing strong improvement was the entry-level/affordable home sector, which slightly more firms rated as weakening as rated it as improving.

Firms in all regions report strong business conditions. However, firms in the South are particularly upbeat, with over half of firms reporting an increase during the first quarter, and only 7 percent reporting declines. Conditions at firms in the Northeast and West were similar: more than 4 in 10 firms reported improved business conditions during the first quarter and about 1 in 10 reported declines. Firms in the Midwest trailed the other regions, but still reported very positive conditions as over a third of firms reported increased billings and only 14 percent reported declines.

Trends feature bigger homes, more property improvements
For certain segments of the housing market, smaller but better-designed homes are growing in popularity. However, for much of residential activity, “bigger is better” remains the watchword. More than 40 percent of firms working on residential projects report that the square footage of homes is still increasing, while only 13 percent report declines in the average floor space of homes.

Some techniques to increase space in the home are showing more popularity than others. The volume of homes is increasing, as over half of firms report that ceiling heights are increasing, and that the volume of homes is growing in other ways, such as two-story entryways and vaulted ceilings. Also, almost half of firms report that finished basements and attics are increasing in popularity, often as owners of older homes are looking to increase their living space. (See graph below "Grounds Being Improved Even as Lot Sizes Shrink")

As homes continue to increase in size on average, they also are increasingly designed to have an open, informal feel. Two-thirds of firms report that “informal space” (e.g. family rooms, dens, activity rooms) is increasing, no doubt replacing formal living rooms and dining rooms. Related to this design trend is the increased popularity of an open space layout in the home, a growing trend according to 57 percent of firms.

A majority of firms also report that homes are becoming more accessible, with features such as wider hallways, fewer steps, and other features that can accommodate an aging or less mobile population. Related to this trend is the growing popularity of single-floor design in homes to promote easier mobility. While not universal by any stretch, 29 percent of firms report growing popularity of single-floor designs, while only 16 percent report a decline in this feature.

As homes are increasing their user-friendly feel, architecture firms report that yards are being used differently, increasingly as outdoor living space and with more improvements. Almost half of firms report that upscale landscaping is on the increase, as is the popularity of outdoor living space (with features such as decks, porches, and patios). Thirty percent of firms report the increase in other outdoor amenities, such as swimming pools, tennis courts, and gazebos, while 17 percent of firms report a decrease in these features. A less popular trend is providing greater emphasis on borders, such as fencing, walls, or plantings to define lot boundaries, with 25 percent of firms reporting increased popularity, and 8 percent reporting decreased use.

Even with greater emphasis on the property and more outdoor living, few architecture firms report growing lot sizes. To the contrary, only 5 percent of firms indicate that lots are increasing in size, while 43 percent report that lots are getting smaller. The remaining 52 percent indicate that lot sizes are not significantly changing in either direction.

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