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Lower End of Housing Market Poised to Lead Recovery

The housing market has always been a cyclical business. Now the lower end of the housing market—the first sector to plummet at the beginning of the housing recession—seems to be stirring back to life, spurred in part by the $8,000 first-time homebuyer tax credit, lower interest rates, rock bottom prices and more affordable new home designs.

All these factors have combined to make housing more affordable than at any time in recent memory. In fact, the National Association of Home Builders/Wells Fargo Housing Opportunity Index, released in February, found that 70.8 percent of all new and existing homes sold in the final quarter of 2009 were affordable to families earning the national median income of $64,000. The percentage is among the highest ever recorded in the index's 18-year history.

To be sure, housing is not out of the woods yet, but inventories are down and architectural firms who concentrate on residential projects "appear to be nearing a bottom in revenue" and reported "encouraging trends" in business activity for two out of the last three months, according to an American Institute of Architects "WORK-ON-THE-BOARDS" survey released in February. By contrast, firms who specialize in commercial or institutional design are still experiencing declining conditions.

What Are Builders Building?

To woo buyers, builders are embracing the "less is more" mood of the country, offering more basic products at more realistic prices. This trend was reaffirmed during the 2010 International Builders' Show, where a panel of architects at the AIA Residential Design Trends seminar declared the end of the faux mansion "that people really couldn't afford in the first place," said one panelist.

The architects reported that in many areas of the country, long-vacant builder lots once intended for those oversize homes are being "repositioned" to accommodate the smaller cottage-style residences—and budgets of first-time homebuyers. These "value box" homes feature kitchen-centric, open floor plans that eliminate wasted space like formal dining and his-and-her bath areas. The homes are also engineered to easily accommodate upgrades such as additional garages and bedrooms.

On the exterior, architects are seeing continued interest in front and side porches, as well as more simple detailing. In another survey of 500 architectural firms conducted last Fall by the AIA, "three-quarters of respondents reported growing interest in low-maintenance exterior materials (e.g. fiber cement board and stone)."

Reduce, Re-Use and Recycle

Much like those dormant, oversized single-family lots, architects have also been busy repurposing obsolete buildings (such as old office towers) into hip, affordable infill living near entertainment and transportation.

In fact, Steinberg told attendees the multi-family segment now is "clearly" setting the design trends that eventually filter down into single-family home designs. The panel cited loft-style floor plans, contemporary architecture and growing community amenities (pub anyone?) as innovations that are now reaching single-family products.

Nowhere But Up

After some of the worst years on record for the housing industry, the sector appears to be turning a corner—to a block filled with better designed, more affordable homes. At James Hardie Building Products, we're prepared to help lead the way!