Civil/Structural Engineering, Vashon, Washington, USA 206-463-5311
Ellisport Engineering Blog
Current Residential Building Trends - Our observations March 2013

We’ve been observing how building trends have changed before and after the market crash, and I thought I would share some of those insights.  According to Wikipedia, the Great Recession, also known as the Lesser Depression, began in December 2007, with the effects fully felt around September 2008.  This dealt a real shake-up to the residential building industry; these effects are still “shaking out” as the field changes to reflect consumers’ needs and demands.


Before The Crash

Before the crash, owners had the following concerns and expectations:

  • Lock in interest rates quickly, before rates changed.
  • Rush the design process and submit for permits quickly to get into the permit queue.  Sometimes, permit approval could take 4-6 months.
  • Build as much as you could afford.  Building costs (labor and materials) were only going up, but so were house values, so it seemed a good investment.
  • Owners expected that they would realize an immediate increase in their house value, reflective of their improvements.  It was very popular to “flip” a house: buy an older home, improve it, and sell it quickly to recoup the investment and collect a profit.


After The Crash

After the crash, owners had a harsh reality to face.  Their house’s appraised value dropped significantly, 25% or more.  There was a glut of homes on the market, primarily due to foreclosures and upside-down mortgages.  Periodic normal home investments (remodeling, new bathrooms or kitchens, and maintenance like painting and new roofs) nearly stopped.  Today:


  • Interest rates are so low that there is no sense of urgency for home improvements.
  • The design process, especially for architects, may extend for many months longer than before.  Permit review times are still lengthy, as public agencies are short-staffed due to cutbacks.
  • Owners are now contemplating and building much smaller projects, as they consider the most cost-effective options and vacillate over how much to spend, knowing they may not be able to recoup their investment for several years.
  • Flipping homes is just now re-surfacing, as people are buying up the excess inventory of homes at deeply discounted prices.  However, these same homes may be suffering from “deferred maintenance”.  So, along with interior upgrades, there is often exterior repair work.
  • Owners won’t hesitate to “pull the plug” on a project, if they feel uncertain about the economic environment and their personal employment status.


We’ve noted that people have been waiting a long time, in some cases 5 years or more, to build or remodel.  However, most clients are taking “baby steps” – phased construction of smaller projects instead of one large project.  Most of our projects are modest remodels, and there is little new construction occurring.


What do I expect for the future?  Generally, I expect more of the same for the next 3-5 years.  I think people’s mindsets were heavily affected by this prolonged recession, which is still affecting many industries like ours.  Their spending habits have changed, and their expectations are lowered.  Most people expect “deals” and have gotten used to “discounts”, yet material prices and labor costs have not decreased much.  The building market is oh so slowly improving, but owners are still guarded in the their optimism and careful with their money.

 

 

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