i've been entertaining ideas of doing some small scale residential development. the state of the real estate market has definitely given me pause, but i think something that's lost on a lot of people is that the decline of the real estate market is a general market trend; it's not something that is going to affect each individual project. a slumping economy is generally the time to buy. there are great deals out there now. the gamble is whether prices will continue to decline before you sell, but once again, that's on a case by case basis. it's important to be well researched at this point before you start anything.
for residential architects, the slumping housing market is a bigger problem. if you expect new clients to just walk in the door, it's probably not going to happen. there's going to be a slow down. that puts a greater imperative on architects to be more creative in how they are running their business whether that means diversifying project types, changing a marketing strategy, or persuing development opportunities.
While large swaths of recently built suburbia is taking a hit we also are faced with something else called high energy prices. I think the demand for transit oriented development, new urbanism, walkable communities will continue to stay high.
I agree. It is definitely a time to plan, get projects under way. In a few months cities will be happy to have and approve new projects and costs will be down. By the time projects are completed (3-4 years) the markets should be better. Aim for professional builders and rental projects.
Now is just a terrible time to complete a residential for sale project.
it is also nice in the building departments right now getting stuff permitted. You dont have the ungodly lengths of time for plancheck like you did a year ago
if you've been living off of residential architecture for a while, than chances are you're doing custom, high-end residential. if you are designing multi-million dollar homes, than you should be insulated from any potential economic problems. my office is seeing no end in sight to the residential projects coming down the pike. everybody in a certain sect of society continues to need a third or fourth 8000 SF home. the rich are always rich, even when the rest of us are poor.
I honestly don't know that I agree that material costs are going to go down. I'd like to say that they would because of the rules of supply and demand but I fear that with the cost of energy going up, material costs are only going to go up as well.
I actually think there will be a downturn in the market for hiring architects soon, and that this will be at least marginally related to the housing market slump, I just hope that I'm still in grad school until it picks back up again.
I highly doubt material prices will be going down anytime soon. There are more factors at play than a slowing residential contruction market.
For one the US Dollar has been in near free fall this year. That directly affects anything imported. On top of that energy prices are marching upwards. A lot of building materials are direct by-products of oil. More indirectly, it takes energy to produce building materials. So, even if the product isn't oil derived, it takes oil (energy) to run the machines that produce it. Thirdly, commodities have been on a multi-year trend upwards which doesn't appear to be slowing. Steel, copper, aluminum all keep costing more, regardless of volume.
I've read many news articles where economists are seeing similarities of the 1970's. High energy prices, high inflation, etc. From what I've been told back then all the rave was making your home energy efficient. People started taking things like insulation seriously.
Outside of supersizing our houses, I think we've managed to make new homes relatively efficient these days. At least the materials are out there and avilable. This time around I think the move will be towards the more offensive waste of energy - sprawl and the inefficient auto transportation it requires. Someday people won't be able to afford their 100 mile round trip commutes. Thus, I'm betting on a new urban planning style for residential construction.
Agree with WonderK and aquapura. Material and construction costs are going nowhere but up. Remember fuel costs are built into material production and transportation costs, nevermind the scarcities caused by the building glut in the UAE and China.
I can't wait to see used SUVs and McMansions hitting the market. I've been waiting for this. The value of these things will plummet and keep going.
Downside, of course, is that inevitably hurts everyone.
The difference from now and the 70s is that the economy is relatively strong, profits are high, productivity is high, unemployment low, etc. It's a different scenario, although no one ever knows.
From what I've read and heard, it'll go down for another year or so, level off, then start over.
This is the time to be looking to buy. As soon as there is consensus that everything sucks, then we'll be close to the bottom and it'll turn around (just like when everyone says things are super peachy, it's time to sell).
trace...sounds alot like surfing, paddle when its down and sell when its high....
The two things I keep watching is Modern PreFAB and TODs. I wonder if the bubble popping is such a bad thing, maybe let some manufacturing technologies fill in the inefficiency gaps, and the oil crisis just makes a lightrail look better and better. So maybe boutique firms get hit. (and yes , those McMansion outfits are sitting pretty aren't they, bitches)
Being an Independent Contractor, I like the adjustability I have, even if its not stable, but I really haven't seen less building per see,..just less "brand new buildings"
Money, that is lent by banks in large chunks to other banks and then distributed to smaller institutions, corporations and individuals, is like a river. The volatility in the stock market, as driven by its wretched gristly underbelly of sub-prime mortgage lending (which at some stage must have looked like high-yield thieving from stupid and poor), presaged the shrinking flow at the spring of the cash river.
It takes a few years to dry out right down at the bottom. The money lent some time ago was committed to projects which are ongoing. The skyscraper index suggests that the construction of the world's tallest building is symptomatic of an excess of investment funding at low interest rates. This leads to a preference for highly debt-leveraged long-term investments (25 year mortgage anyone? Build a skyscraper anyone?). Land investments and buildings, the machines that make money out of land, become choice investment vehicles.
The higher the potential rent at a particular location, the higher one can afford to build, and thus the more the underlying land is worth, thus the bigger the project, spiralling up in price and height in super-dense financial hubs until we reach the (new) world's tallest building. The magnetism of such concrete long-term investments leads to steep rises in GDP and measured economic growth, and unsustainable economic imbalances. Every one is a winner, you and me too, until some stem of economic infrastructure is undermined or buckles.
Then the down-swing starts: construction as an industry lags the GDP peak by 1-3 years. The new world's tallest, by then with funds committed and under construction, the biggest most grotesque expression of hubristic money-making, based on credit and pretension, the peacock sage of imminent depression.
And a poor earner in the depressed market that it is delivered into.
However it could be that, at the pinnacle of our powers to organise men and machines to create, in attempted harmony, whatever piece of jewel-encrusted folly it is that we choose to make. When the world is our oyster, and we wish to beautify her pearls. When we have it all.
I do think prefab and TODs will continue to grow in popularity, rapidly in fact (they already are). This is a good thing, if we just have a correction and level off smoothly.
Commuting is something I cannot understand. Spending a full day out of the week driving to work and back is crazy, imho. Sleeping on a train makes a hell of a lot more sense. Many have niceties like Wi Fi, and how long can it be before Starbucks sees $$ (Europe has some nice coffee on some of the trains I've been on) and adds that to the commute.
Anyway, these markets are ripe for a catalyst. The subprime collapse is making these things look better than ever. Add in oil closing in on $100 and its hard to imagine that everyone, including the McMansion devs, will be jumping on.
Fingers crossed this will all be a smooth landing and a great transition.
it's true. this seems like a great time to reposition an office with a green angle. i believe we're close to a tipping point where green design will enter the mainstream. goodbye mcmansions; hello carbon neutral.
(though i think we're still some time away from any sort of repopulation of our cities; old suburban habits are hard to break.)
PsyArch,
that was uh, quite a piece of work. I had to read it a couple times, but however mystical, you poetically mix in some good points. I am left struck reeling by a thought of how literal, almost diagramitic the skyscraper motif is ,...almost like a literal "spreadsheet structure"...anyway..back to earth
I wonder if the abiltiy of such "catalysts" will truly drive diversification, or if these needs for changing the design, construction, and development paradigm(s) will shortly return after a seeming return to normalcy. Hopefully this kind of market-initiation will leave it's mark in the form of increased awareness of the value of community-specific financial decision making...and perhaps some improvements in energy usage on an urban and suburban scale.
... but this is America, the same America that thrives on Nascar ,Home Depot, and 5000+ sq. ft. houses.
"Latest data shows that the material costs of zinc, rebar, asphalt and copper all increased by over 15% in the past year. Anecdotal evidence also suggests that in the current marketplace there is particular pressure on the availability and hence the price of float glass and stainless steel."
However,
"The outlook for 2007 and 2008 is for a continuation of inflationary pressure, with the principal driver going forward coming from growth in construction activity rather than increases in the costs of labour and materials."
if you all want to see a broad indicator of construction costs, sign up to get ken simonson's weekly newsletter. he's the chief economist/forecaster for the general contractor's association. once a quarter, he sends out an index which has all the current major building material prices, indexed back 5 years so you can see the larger trends.
anything petroleum based is not going down in price. most metals, especially copper, are going up. gypsum has stabilized; most woods have stabilized. a few things are going down.
how to sign up for the digest...
The Data DIGest is a one-page summary of the weeks economy news, plus implications for construction segments, prepared by AGCs Chief Economist, Ken Simonson. To join the DataDIGest, send a blank e-mail message to join-datadigest@agclists.org
(and i'm not even going to comment on why the agc can run this for free to anyone, while the aia ....)
Nov 10, 07 10:15 am ·
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What does the state of the housing market mean for Residential Architects?
Any thoughts?
Are you serious?
yes
...so I , for one, wonder if there are some apparent increases in additions....
(for example)
I don't think we will see an increase in anything (except unemployment, default, and foreclosure) for another several years.
i've been entertaining ideas of doing some small scale residential development. the state of the real estate market has definitely given me pause, but i think something that's lost on a lot of people is that the decline of the real estate market is a general market trend; it's not something that is going to affect each individual project. a slumping economy is generally the time to buy. there are great deals out there now. the gamble is whether prices will continue to decline before you sell, but once again, that's on a case by case basis. it's important to be well researched at this point before you start anything.
for residential architects, the slumping housing market is a bigger problem. if you expect new clients to just walk in the door, it's probably not going to happen. there's going to be a slow down. that puts a greater imperative on architects to be more creative in how they are running their business whether that means diversifying project types, changing a marketing strategy, or persuing development opportunities.
the people we design houses for are the money lenders.
Foreclousurtecture?
location location location
While large swaths of recently built suburbia is taking a hit we also are faced with something else called high energy prices. I think the demand for transit oriented development, new urbanism, walkable communities will continue to stay high.
material costs are going to go down as are construction costs
@mdler
I agree. It is definitely a time to plan, get projects under way. In a few months cities will be happy to have and approve new projects and costs will be down. By the time projects are completed (3-4 years) the markets should be better. Aim for professional builders and rental projects.
Now is just a terrible time to complete a residential for sale project.
it is also nice in the building departments right now getting stuff permitted. You dont have the ungodly lengths of time for plancheck like you did a year ago
if you've been living off of residential architecture for a while, than chances are you're doing custom, high-end residential. if you are designing multi-million dollar homes, than you should be insulated from any potential economic problems. my office is seeing no end in sight to the residential projects coming down the pike. everybody in a certain sect of society continues to need a third or fourth 8000 SF home. the rich are always rich, even when the rest of us are poor.
I honestly don't know that I agree that material costs are going to go down. I'd like to say that they would because of the rules of supply and demand but I fear that with the cost of energy going up, material costs are only going to go up as well.
I actually think there will be a downturn in the market for hiring architects soon, and that this will be at least marginally related to the housing market slump, I just hope that I'm still in grad school until it picks back up again.
I highly doubt material prices will be going down anytime soon. There are more factors at play than a slowing residential contruction market.
For one the US Dollar has been in near free fall this year. That directly affects anything imported. On top of that energy prices are marching upwards. A lot of building materials are direct by-products of oil. More indirectly, it takes energy to produce building materials. So, even if the product isn't oil derived, it takes oil (energy) to run the machines that produce it. Thirdly, commodities have been on a multi-year trend upwards which doesn't appear to be slowing. Steel, copper, aluminum all keep costing more, regardless of volume.
I've read many news articles where economists are seeing similarities of the 1970's. High energy prices, high inflation, etc. From what I've been told back then all the rave was making your home energy efficient. People started taking things like insulation seriously.
Outside of supersizing our houses, I think we've managed to make new homes relatively efficient these days. At least the materials are out there and avilable. This time around I think the move will be towards the more offensive waste of energy - sprawl and the inefficient auto transportation it requires. Someday people won't be able to afford their 100 mile round trip commutes. Thus, I'm betting on a new urban planning style for residential construction.
Agree with WonderK and aquapura. Material and construction costs are going nowhere but up. Remember fuel costs are built into material production and transportation costs, nevermind the scarcities caused by the building glut in the UAE and China.
I can't wait to see used SUVs and McMansions hitting the market. I've been waiting for this. The value of these things will plummet and keep going.
Downside, of course, is that inevitably hurts everyone.
The difference from now and the 70s is that the economy is relatively strong, profits are high, productivity is high, unemployment low, etc. It's a different scenario, although no one ever knows.
From what I've read and heard, it'll go down for another year or so, level off, then start over.
This is the time to be looking to buy. As soon as there is consensus that everything sucks, then we'll be close to the bottom and it'll turn around (just like when everyone says things are super peachy, it's time to sell).
trace...sounds alot like surfing, paddle when its down and sell when its high....
The two things I keep watching is Modern PreFAB and TODs. I wonder if the bubble popping is such a bad thing, maybe let some manufacturing technologies fill in the inefficiency gaps, and the oil crisis just makes a lightrail look better and better. So maybe boutique firms get hit. (and yes , those McMansion outfits are sitting pretty aren't they, bitches)
Being an Independent Contractor, I like the adjustability I have, even if its not stable, but I really haven't seen less building per see,..just less "brand new buildings"
Money, that is lent by banks in large chunks to other banks and then distributed to smaller institutions, corporations and individuals, is like a river. The volatility in the stock market, as driven by its wretched gristly underbelly of sub-prime mortgage lending (which at some stage must have looked like high-yield thieving from stupid and poor), presaged the shrinking flow at the spring of the cash river.
It takes a few years to dry out right down at the bottom. The money lent some time ago was committed to projects which are ongoing. The skyscraper index suggests that the construction of the world's tallest building is symptomatic of an excess of investment funding at low interest rates. This leads to a preference for highly debt-leveraged long-term investments (25 year mortgage anyone? Build a skyscraper anyone?). Land investments and buildings, the machines that make money out of land, become choice investment vehicles.
The higher the potential rent at a particular location, the higher one can afford to build, and thus the more the underlying land is worth, thus the bigger the project, spiralling up in price and height in super-dense financial hubs until we reach the (new) world's tallest building. The magnetism of such concrete long-term investments leads to steep rises in GDP and measured economic growth, and unsustainable economic imbalances. Every one is a winner, you and me too, until some stem of economic infrastructure is undermined or buckles.
Then the down-swing starts: construction as an industry lags the GDP peak by 1-3 years. The new world's tallest, by then with funds committed and under construction, the biggest most grotesque expression of hubristic money-making, based on credit and pretension, the peacock sage of imminent depression.
And a poor earner in the depressed market that it is delivered into.
However it could be that, at the pinnacle of our powers to organise men and machines to create, in attempted harmony, whatever piece of jewel-encrusted folly it is that we choose to make. When the world is our oyster, and we wish to beautify her pearls. When we have it all.
We choose to make skyscrapers.
And then it all goes to shit.
Still, it's a whole lot better than war.
Peace, to all you glass cock lovers.
I do think prefab and TODs will continue to grow in popularity, rapidly in fact (they already are). This is a good thing, if we just have a correction and level off smoothly.
Commuting is something I cannot understand. Spending a full day out of the week driving to work and back is crazy, imho. Sleeping on a train makes a hell of a lot more sense. Many have niceties like Wi Fi, and how long can it be before Starbucks sees $$ (Europe has some nice coffee on some of the trains I've been on) and adds that to the commute.
Anyway, these markets are ripe for a catalyst. The subprime collapse is making these things look better than ever. Add in oil closing in on $100 and its hard to imagine that everyone, including the McMansion devs, will be jumping on.
Fingers crossed this will all be a smooth landing and a great transition.
it's true. this seems like a great time to reposition an office with a green angle. i believe we're close to a tipping point where green design will enter the mainstream. goodbye mcmansions; hello carbon neutral.
(though i think we're still some time away from any sort of repopulation of our cities; old suburban habits are hard to break.)
PsyArch,
that was uh, quite a piece of work. I had to read it a couple times, but however mystical, you poetically mix in some good points. I am left struck reeling by a thought of how literal, almost diagramitic the skyscraper motif is ,...almost like a literal "spreadsheet structure"...anyway..back to earth
I wonder if the abiltiy of such "catalysts" will truly drive diversification, or if these needs for changing the design, construction, and development paradigm(s) will shortly return after a seeming return to normalcy. Hopefully this kind of market-initiation will leave it's mark in the form of increased awareness of the value of community-specific financial decision making...and perhaps some improvements in energy usage on an urban and suburban scale.
... but this is America, the same America that thrives on Nascar ,Home Depot, and 5000+ sq. ft. houses.
Actually material prices HAVE dropped. And building and construction prices are leveling off.
"Latest data shows that the material costs of zinc, rebar, asphalt and copper all increased by over 15% in the past year. Anecdotal evidence also suggests that in the current marketplace there is particular pressure on the availability and hence the price of float glass and stainless steel."
However,
"The outlook for 2007 and 2008 is for a continuation of inflationary pressure, with the principal driver going forward coming from growth in construction activity rather than increases in the costs of labour and materials."
(Davis Langdon July '07)
if you all want to see a broad indicator of construction costs, sign up to get ken simonson's weekly newsletter. he's the chief economist/forecaster for the general contractor's association. once a quarter, he sends out an index which has all the current major building material prices, indexed back 5 years so you can see the larger trends.
anything petroleum based is not going down in price. most metals, especially copper, are going up. gypsum has stabilized; most woods have stabilized. a few things are going down.
how to sign up for the digest...
The Data DIGest is a one-page summary of the weeks economy news, plus implications for construction segments, prepared by AGCs Chief Economist, Ken Simonson. To join the DataDIGest, send a blank e-mail message to join-datadigest@agclists.org
(and i'm not even going to comment on why the agc can run this for free to anyone, while the aia ....)
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