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Tag Archives: Michael J. Berens

Remodelers brace for deceleration

Michael J. Berens

Wednesday, December 05, 2018

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Remodelers brace for deceleration

The good news for remodelers, according to recent forecasts, is that demand is expected to continue to grow over the next three years. The not-so-good news is that growth will be slower than it has been for the past three years.

Although many remodelers remain optimistic conditions will improve in the months ahead, some already are anticipating a decline in the fourth quarter of this year.

Recently released data confirms the trend reported last month that remodeling activity remained strong in the third quarter of this year. Metrostudy announced that its Residential Remodeling Index (RRI) hit a new all-time high in the third quarter (115.7), up 1.1 percent from the previous quarter and 5.2 percent from the same time last year.

That makes 26 consecutive quarters of quarter-over-quarter growth since 2011, said Metrostudy. The report projects that all 381 metro statistical areas (MSAs) should experience growth of around 4.8 percent for the year.

Mark Boud, chief economist at Metrostudy, attributed the growth to a strong job market and people choosing to remain in their homes and make improvements rather than purchase a next home. At the same, noted Boud, other factors, such as an expected plateau in job growth as the nation approaches full employment, decreasing home affordability, declining sales of existing homes, and increased costs of labor and materials will likely put a damper on demand.

Weighing both sides of the equation, Boud projects “net-positive” modified growth over the next two years of 2.9 percent in 2019 and 2.3 percent in 2020. Growth is expected to move upward again in 2021.

His projections are in keeping with the most recent Leading Indicator of Remodeling Activity (LIRA) forecast, which also foresees growth for the entire home improvement industry decelerating from a decade high of 7.7 percent this year to 6.6 percent by the third quarter of 2019.

Some remodelers are already beginning to experience softening demand and anticipate a decline in growth in the fourth quarter.

GuildQuality, which conducts customer service surveys for various industries, reported that the portion of remodelers responding to its 2018 Fourth Quarter Market Predictions survey who stated they believe market conditions would decline in the fourth quarter hit an all-time quarter-over-quarter high, up 17.1 percent, or more than four times that of the third quarter. The portion who stated they believed the market would improve dropped by 20 percent.

In addition, only 50 percent of respondents to the GuildQuality survey said they thought their company’s performance would improve in the fourth quarter, compared to 71.2 percent a year ago. At the same time, the portion who anticipated performance would decline rose 7.4 percent (to 9.8 percent vs. 2.4 percent in 2017).

These figures are mostly an indication of just how well business has been lately for remodelers, who did not experience the usual seasonal slowdown in fourth quarter demand last year, rather than the beginning of a downward slope.

On the whole, remodelers remain optimistic that market conditions will remain favorable in the coming months. The portion of GuildQuality respondents who said current market conditions are “Good” or “Excellent” actually increased by 1.7 percent (to 84.3 percent) over the previous quarter.

Similarly, the National Association of Home Builder’s third quarter Remodeling Market Index (RMI) found market conditions have remained relatively stable, with a majority of remodelers experiencing positive growth, although expecting some possible softening in the fourth quarter.

These fluctuations are likely to continue as market conditions wobble between opportunities and challenges. Remodelers will need to adjust to a new pace in the year ahead, not exactly that of the tortoise, but not that of the hare they have enjoyed lately.

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Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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Inventory boost lifts home sales

Michael J. Berens

Wednesday, November 28, 2018

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Inventory boost lifts home sales

More buyers looked favorably on the housing market in October, encouraged by a greater number of homes for sale, continued slowing in home prices, and a temporary decline in mortgage rates.

Existing home sales posted their first month-over-month positive growth in six months. New home sales, on the other hand, plummeted to their lowest point in over three-and-a-half years, even as inventories increased and prices dropped. Riding the same downward trajectory, construction of new homes also declined for the second month in a row.

Although the number of existing homes for sale decreased slightly from the end of September to the end of October, available inventory was up from the same period a year ago, according to the National Association of Realtors (NAR).

Real estate website Zillow reports that total available inventory in the metro areas it tracks rose 3 percent year-over-year in October, the first time in four years it has exceeded 1 percent growth. Availability was not widespread, however, with metro areas in California, for example, reporting big gains.

Home prices remain high, but the pace at which prices have been increasing has been slowing over the past six months due to weak sales. According to the latest S&P CoreLogic Case-Shiller home price index, prices in October were 5.1 percent higher than a year ago, down from 5.5 percent in September. The NAR stated the median price of an existing home was 3.8 percent higher than in October 2017, down from 4.2 percent year-over-year in September.

Along with increased inventory and easing prices, some buyers in late October would have been able to take advantage of a temporary dip in mortgage rates that occurred in response to turbulence in the stock and bond markets. That may have provided an added incentive to commit to a purchase while conditions were more favorable.

These trends helped push sales of existing homes up 1.4 percent for the month, compared with September’s drop of 3.4 percent, said the NAR. It was the first time since March that month-over-month sales enjoyed positive growth.

Activity was strongest in the Northeast, South and West. Most of the gains came from sales of condos and co-ops, which were up 5.3 percent over the previous month. Sales of single-family homes remained nearly flat, and are now 5.3 percent lower than the same time last year.

Higher than average prices (for existing homes) and rising interest rates are taking their toll on new home sales, which plunged 8.9 percent in October, following a 5.5 percent drop in September, to their lowest point since March 2016. The median price of a new home dipped to $309,700 (3.1 percent lower than the same time last year), but the average price was $395,000 – both far higher than the $255,400 median price (up 3.8 percent) for an existing home sold last month.

The softening market for new homes pushed inventories up to 7.4 months, the highest level of supply in seven and half years, reports MarketWatch. Not surprisingly, new single-family starts declined 1.8 percent from September, and permit requests were down 0.6 percent.

While October’s numbers were a welcome relief for real estate agents after a disappointing third quarter, market indicators suggest the growth in sales is not likely to continue for the remainder of the fourth quarter. Fannie Mae stated that its Home Purchase Sentiment Index (HPSI) fell for the second month in a row, by 2 points, in October.

Concerns about home prices, mortgage rates, and personal financial security combined to bring down the portion of participants saying “now is a good time to buy a home” by 5 points and those saying “now is a good time to sell a home” by 3 points.

Builders, too, are less optimistic about business activity in the coming months. In announcing that the Housing Market Index (HMI) for November had decreased by 8 points, to 60 (its lowest point in over three years), Randy Noe, chairman of the National Association of Home Builders, stated builders are reporting “that customers are taking a pause due to concerns over rising interest rates and home prices.” Current sales activity was down 7 points, customer traffic down 8 points, and expected future activity down 10 points.

Activity is expected to remain flat or worse going into next year. At the NAR’s annual conference earlier this month, chief economist Lawrence Yun told the audience his current forecast projects existing-home sales this year will finish at a pace of 5.345 million — a decrease from 2017 (5.51 million). In 2019, sales are forecasted to increase to 5.4 million, a 1 percent increase, provided the market begins to stabilize.

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Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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Remodeling market sending mixed signals as 2019 begins

Michael J. Berens

Thursday, January 10, 2019

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Remodeling market sending mixed signals as 2019 begins

Will 2019 be another banner year for remodeling and renovation, or will firms begin to experience a softening in demand? As the new year gets underway, the answer seems to be that it depends on which part of the market you are looking at. Early indicators point to ongoing demand but a decrease in the size and value of projects.

Results from the just-released Q1 2019 Houzz Renovation Barometer show “a mixed degree of caution about market conditions among contractors, architects and designers,” states Houzz principal economist Nino Sitchinava.

In general, participating contractors were less optimistic about current and future demand than were architects and designers, who reported an uptick in business activity during the fourth quarter of 2018.

Contractors’ Expected Business Activity Indicator dropped seven points from Q4 2018, with expectations for new inquiries and for new projects each down seven points. Recent Business Activity for the fourth quarter of 2018 also dipped by four points. Project backlogs increased slightly in the first quarter and were up nearly two weeks from the same period a year ago.

Architects and designers, on the other hand, reported a five-point rise in business activity during the fourth quarter of 2018. First-quarter expectations show a slight rise in project inquiries, but requests for new projects remained unchanged from the previous quarter. Project backlogs have decreased slightly as well, suggesting a possible lull in demand in the early part of the year.

Both sectors cited rising costs of products and materials as the main reason customers were reluctant to proceed with new projects at present. Those sentiments coincide with the slip in consumer confidence during the past couple of months due to concerns about a weakening economy and its possible effect on employment and income.

According to a recent article for Kitchen & Bath Design News, industry economists are somewhat divided as to their growth projections for 2019. All agree that growth will remain positive but not at the double-digit levels enjoyed for the past several years.

They foresee annual industry growth of between about 3 to 6 percent. Part of that variation depends on which sectors are included in the forecast, such as disaster recovery and home repair, as well as remodeling and renovation.

These economists, too, see rising prices and labor costs as major dampening forces this year. Notes author Patrick O’Toole, “Those rising costs are getting passed along to clients in the form of higher prices. So far, clients are accepting those increases without too much push-back. But there are limits to how long clients will agree to higher prices.”

The Houzz results suggest that that pushback has already started. If the housing market remains stalled, home prices continue to drop, and interest rates continue to rise, homeowners likely will cut back on new projects and/or decide to undertake less expensive projects. Under that scenario, remodelers and designers should see continued demand for their services, but with less revenue growth compared to 2017 and 2018.

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Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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Interior design recovery robust but uneven

Michael J. Berens

Wednesday, September 21, 2016

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Interior design recovery robust but uneven

 

After several years of modest growth following the recession, the interior design industry experienced a surge of activity in 2015 that continued into the first half of this year. Although demand softened somewhat in the third quarter, in most areas of the country the industry has made a full recovery.

But not in all. While some states have seen big gains, others are still struggling to return to their prerecession level, as indicated by data from the U.S. Bureau of Labor Statistics (BLS).

An analysis of BLS State Occupational Employment and Wage Estimates (OES) for interior designers for the years 2010 to 2015 (the most recent available annual data) shows most states have rebounded since the industry contracted from its peak following the economic downturn, which began in late 2008 but had its biggest impact on the industry in 2010-2011.

About half the states’ estimated figures for 2015 show employment at or around prerecession levels. (BLS data does not include self-employed designers.) Some states have even well exceeded those levels, and others have made a big comeback after two or more years of substantial declines.

A few, however, have experienced erratic growth and have yet to reach a healthy recovery.

Since 2010, 13 states have exceeded their prerecession employment levels by 30 percent or more, as of May 2015. Five have seen gains of more than 100 percent. Utah went from a low of 190 employed designers in 2012 to 520 in 2015, an astounding increase of 173 percent in just three years.

Others include South Dakota (133 percent), Alabama (122 percent), Rhode Island (111 percent) and North Dakota (100 percent). Close behind are Oklahoma (95 percent), Mississippi (92 percent) and Nevada (90 percent). Rounding out the list are Colorado, the District of Columbia, Illinois, Maryland, Massachusetts, Tennessee, Texas and Washington.

In terms of numbers of employed designers, Texas leads the pack for biggest gains, having added 1,650 positions between 2011 and 2015, for a total of 4,780. California continues to hold first place as the state with the most interior designer employees — 6,770 — but it experienced fewer highs and lows during the period from 2010 to 2015.

Other states with a big boost in employment are Illinois (890 new positions), New Jersey (780), Ohio (740) and Colorado (690). Several other states — Massachusetts, Wisconsin and Utah— each exceeded 300 new positions.

Nine states have made notable comebacks in just the past two years. Mississippi, for example, by 2013 had lost about a third of its interior design employees (50 positions) but rallied, reaching 260 employees in 2014. Nevada’s employment level fell from 370 in 2010 to 210 by 2013, but it rebounded to 400 by 2015. In addition to Utah, Rhode Island and Ohio (mentioned above), Wisconsin, Michigan, Kansas and Virginia have also enjoyed resurgences in hiring during 2014-2015.

Several states have not been so fortunate.

In Connecticut, interior design employment waxed to 980 designers in 2013 but had waned to 620 by 2015, a decline of 37 percent. Minnesota, which reported a prerecession level of 1,090 employees, fell to 730 in 2015, a drop of 33 percent. And South Carolina, which bounced back to 470 employees in 2012, counted only 390 in 2015, a 17 percent loss. Oregon’s employment levels have see-sawed throughout the post-recession period, jumping from 300 in 2011 to 640 in 2013, up to 850 in 2014, and then back down to 750 last year.

Looking across the data, it is difficult to say what accounts for the rise and fall of activity in particular states. Interior design activity is dependent on many factors — the overall health of the economy (federal, state and local), personal income and worth, construction activity, housing prices, population density, consumer confidence, lifestyles, attitudes toward luxury and consumerism, and more.

In some cases, such as in Utah, Colorado, Nevada and the Dakotas, there is a clear link between overall growth within the state and renewed demand for services. In other cases — Rhode Island, perhaps — the location of firms may have less to do with their hiring patterns than the source of their clients.

In any case, given the significant increases in hiring over the past two years and the recent slowdown in demand for services, we can expect to see less volatility in employment for 2016 and possibly 2017.

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Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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Feng shui for the rest of us

Michael J. Berens

Wednesday, May 18, 2016

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Feng shui for the rest of us

Two things homeowners can’t get enough of are energy and time. To help maximize the number of minutes in their day, homeowners are opting for simple, contemporary, low-maintenance designs outfitted with multitasking areas and time-saving amenities such as coffee bars and smart appliances.

When it comes to energy — human, that is —the same principles apply. The physical environment can enhance it or conserve it. That’s where the ancient practice of feng shui can provide useful design guidance.

In a number of Asian cultures, where it has been practiced for thousands of years, feng shui is a time-honored method of harmonizing individuals with the natural and built environment that surrounds them. It involves the use of both practical and esoteric methods to determine the optimal siting for a structure, the configuration of the interior space, and the placement of certain objects, such as mirrors, in the space.

Those who ascribe to its principles believe proper feng shui can help to promote good fortune, long life, good health, happiness and wealth.

Some years ago, feng shui caught the attention of the home and garden media, where it was presented mainly as a décor strategy for creating a positive environment in the home. Although the trend has subsided, it reemerges from time to time, as, for example, in a recent article in Elle Decor magazine on ways to “feng shui your home” for spring.

While it has never gained widespread acceptance within the interior design community, it continues to have its adherents and practitioners, including some interior design professionals, outside those Asian populations in which it is still routinely practiced.

Feng shui has many facets and can get quite intricate in its alignment of external and internal elements. Essentially, though, feng shui is about assessing and managing the flow of life force energy — or qi (pronounced like “chee”) — within a built space. In the words of Amy Daniewicz, who writes on home trends for the lifestyle website Popsugar, “energy flows through a room like water in a stream.”

Using a variety of strategies, feng shui seeks to maximize the presence of positive energy, qi, in the home and eliminate negative energy, sha chi. This involves preventing positive energy from escaping or flowing in the wrong direction and getting rid of stagnant and unsightly areas where negative energy can congregate.

Designers with Seattle-based home builders, American Classic Homes, recently applied these principles to the floor plan of a “typical” American home, showing some basic ways to align room layouts to maximize positive energy. In the illustration below, for example, they demonstrate the proper way to place the sink and stove in a kitchen.

(You can see all the illustrations and recommendations on their website, here.)

In addition to arrangement of space and items in the home, which coincidentally helps to improve accessibility, feng shui seeks a balance and harmony of natural elements, colors and forms. Incorporating plants and daylighting, mixing woods and metals, using design to bring the outdoors indoors, and making a place for both masculine (yin) and feminine (yang) expression are all part of a feng shui approach to creating health and wellness in the home.

In short, at a basic level, feng shui is just good design. It is all about making spaces supportive and healthful for occupants. And who knows, if you apply it to your design practice, it may make you prosperous as well.

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Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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Design on demand: Just a matter of time?

Michael J. Berens

Wednesday, October 19, 2016

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Design on demand: Just a matter of time?

Until recently, living the good life was about having it all: the clothes, the jewels, the cars, the house, the yacht, the private jet — whatever. All that is changing.

Today, living the good life is not about possessions but about possessing, having what you want when you want it, but not owning it. Status now comes not from what you have but who you are and what you do. It is a trend that is already driving a decline in the purchase of luxury goods and reshaping services catering to wealthy consumers.

Will interior design be one of them?

Trend watchers call it the sharing economy, the collaborative economy or the on-demand economy. What began as a matter of necessity during the last recession has now morphed into a matter of preference.

People are renting, borrowing, swapping and repurposing not just to save money but as a way of expressing their values. When it comes to consumerism, today “less is more.” The savvy consumer is the one who keeps up with the latest styles, has access to everything he or she needs and owns little. It is an attitude well-suited to an eco-conscious, socially responsible, trend-sensitive, mobile lifestyle.

And it is not just up-and-coming millennials who have embraced this trend. It is cutting across all economic strata.

Fast Company magazine recently featured an article on the rise of luxury consignment and rental retailers for items like high-fashion clothing, shoes, handbags and jewelry. While these enterprises initially targeted aspirational shoppers who were willing to splurge a bit to don a designer gown for a special occasion, they now count among their clientele the highly affluent, including socialites, professional women, starlets and celebrities.

“It’s not about ownership anymore. It’s about being able to do something without all the responsibilities of ownership,” states former interior designer Sallie Giordano, who has launched Couture Collective, a rental membership club in New York City.

“I think it’s where the world is heading in general,” comments Julia Gudish Krieger, founder and CEO of VillageLuxe, a community-based fashion borrowing website.

Milton Pedraza, CEO of the consulting firm Luxury Institute, agrees. Renting luxury goods rather than purchasing them appeals to young women minding their finances, true, but also to baby boomers who are downsizing and now see an alternative to constant consumption.

“Many older women want to declutter their closets,” he says. “They don’t want to be wasteful.”

According to David Mattin, global head of trends and insights for research and consulting firm Trend Watching, status today relates to intangibles, like experiences, values and ethics. The focus is on self-actualization, and providers of luxury goods and services are retooling their offerings to appeal to the customers’ desire to be healthier, more creative, more productive and an all-around better person.

Running parallel with this trend is the surge in on-demand services like Uber and Amazon Fresh. Mobile connectivity makes it possible to get what you want when you want it any day, any time, anywhere.

“Who needs a car when your smartphone enables instant access to a car and driver?” Mattin said. He cites the example of a company in London, Hunter VIII Hunter, through which one can order a complete gourmet, catered dinner party (including food, beverages, tables and chairs, table linens, flowers, candles, etc.) via an app on 24 hours notice.

Luxury apartments and condos are offering similar types of services, reports the Institute for Luxury Home Marketing. Among the many amenities, features and options being made available to today’s renters to compete for their business are on-site bike repair services, car-sharing services, cooking classes, personal shoppers and pet groomers.

It is not too far a leap from on-demand dinner parties to on-demand interior design for renters wanting a space that reflects their tastes and values or that will make the right impression on important guests without having to purchase new furniture or accessories. And not just for residential clients. Today’s highly mobile workforce has more and more companies outfitting temporary office and meeting spaces rather than investing in properties, construction, equipment and furnishings.

What might on-demand interior design look like? Perhaps something like a cross between online design services and home staging, model homes and/or set design — with items rented, leased or purchased on consignment and returned or resold when the client moves on.

The technology to deliver it already exists. No doubt it won’t be long before some enterprising designers are making headlines with their own, more creative business model.

 

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Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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Turning around homelessness with design

Michael J. Berens

Wednesday, February 08, 2017

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Turning around homelessness with design

On any given day, more than a half-million people — children, women and men, including many veterans — in the United States experience homelessness. That number has been decreasing in recent years, but with rents and home prices rising, many low-income individuals and families could find themselves without the means to pay for housing.

While there is not much designers can do to address the root causes of homelessness, they can help those who are homeless progress along the path to becoming self-sufficient by creating shelters and temporary housing that are more supportive, safe and compassionate.

Media coverage tends to focus on the chronically homeless, who often have severe mental health and/or substance abuse problems or have suffered mental or physical abuse and require special treatment. However, according to a recent report from the National Alliance to End Homelessness, in 2015 these individuals comprised only 15 percent of the total homeless population, and individuals in chronically homeless families just 2 percent.

Most others, either individuals (63 percent) or families (37 percent), temporarily find themselves homeless because they are between jobs, have been priced out or forced out of their homes, or have recently experienced financial difficulties.

Even though government spending and efforts to provide additional shelter for the homeless have increased in recent years, nearly one-third of all homeless lack shelter. The problem is compounded by the fact that certain cities or areas of the country have a higher concentration of homeless than others, which places an extraordinary burden on local resources.

In addition, due to funding restraints, many facilities for the homeless are not well designed to meet their specific needs. Designers can make a critical difference by applying their skills and talents to improving the design of existing facilities and bringing their expertise to the development and construction of new ones.

Of particular importance to the design of interiors for these facilities is accounting for the high incidence of trauma in this population. Being homeless, with its accompanying dangers and stresses, is itself traumatic. Add to that, many homeless individuals are without a home because of previous traumatic events in their lives. Safety, privacy and self-preservation are of utmost importance.

“Shelters vary in their ability to support recovery, and some provide an environment conducive to healing. Unfortunately, we have found this to be the exception, and many facilities can instead exacerbate stress,” said Jill Pable, a professor in the Department of Interior Design and Architecture at Florida State University, who has conducted extensive research on design for homelessness.

Designers are needed to create spaces that are welcoming, demonstrate a safe environment and provide some degree of privacy, while at the same time not interfering with staff’s need to monitor residents’ behavior. Gender privacy is a crucial issue in facilities that provide services to both sexes and families.

Designers can help individuals regain their sense of dignity and empowerment by creating spaces that allow them more independence and control over their environment. They can optimize limited resources through flexible and multifunctional designs that benefit both staff and residents.

Aesthetics also have a profound impact on residents and staff. Environments that are more homelike rather than institutional help to reestablish a sense of normality and serve as a motivator to achieve self-sufficiency.

A number of architects and designers have engaged in these projects, either specializing in such clients or offering pro bono services. Administrators and governments also have come to appreciate the value good design brings to such projects.

A recent article in Archpaper highlights a $1.2 billion bond initiative in the San Fernando Valley that will pay for up to 100,000 housing units for the homeless. Projects underway will emphasize design quality, including one complex to provide permanent supportive housing for veterans that is aiming for LEED Platinum certification.

One of the challenges facing architects and designers who would like to get involved in these projects is the time and effort required to gather and analyze the research and other knowledge required to design for the special needs of this population.

To help meet this need, Pable has founded a nonprofit organization — Design Resources for Homelessness — which last summer launched a website that contains essential information on the issues related to this population, a review of research to date, case studies, databases of designers and projects as well as advocacy organizations for the homeless, and news items on recent developments. She urges designers to assist in whatever way they can with this effort.

“There is a growing realization that new approaches to affordable housing are beneficial to residents,” Pable says. “It is time to gather forces and bring perspectives together that can benefit the future for persons in crisis, and for society as a whole.”

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Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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Tariffs weigh on housing market

Michael J. Berens

Wednesday, July 25, 2018

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Tariffs weigh on housing market

Present and future U.S. tariffs on imported goods are taking their toll on the housing market as both builders and would-be buyers worry about rising costs and the likelihood that economic growth will begin to slow next year. The impact can be seen in market indicators for June, which fell across the board.

Dragged down by rising materials and labor costs, especially the soaring cost of lumber due to increased tariffs on frame lumber from Canada, the rate of new home construction (in units) dropped 12.3 percent in June compared to May, a nine-month low, and is now 4.2 percent below the same time last year.

Single-family starts dropped by 9.1 percent. That trend likely will continue, as requests for permits declined to their lowest level of the year, 2.2 percent below May’s figure and 3 percent from a year ago. Completions remained flat, putting additional pressure on already tight inventories.

Dodge Data & Analytics reports a 4 percent growth (in dollar volume) in residential construction in June. Single-family construction grew by 2 percent, and is up 5 percent compared to a year ago, with the strongest activity occurring in the South.

According to Michael Neal, senior economist for the National Association of Home Builders, “The concern over material costs, especially lumber, is making it more difficult to build homes at competitive price points, particularly for newcomers entering the housing market.” The NAHB’s Housing Market Index, which measures builder confidence, remained unchanged in July, in part because of concerns that higher costs will price homes out of the reach of most prospective homebuyers.

Total increased cost of goods for residential construction is up 5.4 percent since the beginning of the year, with lumber leading the way. Lumber prices have skyrocketed as high as 20 percent higher, depending on the type and source of the lumber and the size of the house.

Those higher prices put a crimp in June new home sales (in units), which fell 5.3 percent, more than twice what industry experts had expected. Sales are still up 2.4 percent over last year, however. Prices fell for a second month, perhaps an indication of market pressures, but are still well above what most prospective buyers can afford. The media price of a new home came in at $302,100, and the average price was $363,300.

Builders are not the only ones worried about the effects of tariffs.

The University of Michigan’s Surveys of Consumers at early July showed “negative concerns about the impact of tariffs have recently accelerated, rising from 15% in May, to 21% in June, and 38% in July,” states the Survey’s chief economist, Richard Curtin. In particular, consumers, especially more affluent consumers, are concerned about the possible negative impact tariffs could have on economic growth in the near future and on inflation.

These bread-and-butter concerns are causing some hesitancy on the part of potential homebuyers. Fannie Mae’s Home Purchase Sentiment Index for June slid 1.6 points in June, following two months of gains, including an all-time high in May.

Rising home prices and mortgages are among the reasons. And while participants indicate that on the whole they are optimistic about the economy and their personal finances, more of them in June expressed concerns that they could lose their job and that their incomes were not higher than they were a year ago. Tariffs and threats of more tariffs to come are contributing to those dimmer outlooks.

Even with these concerns, demand for housing remains high. Tight inventories and rising prices, however, continue to shut many prospective buyers of existing homes out of the market.

Sales of existing homes declined for the third straight month, although by less than 1 percent. Sales are now down 2.2 percent from the same time last year, while the median price of a home hit a new all-time high ($276,900), up more than 5 percent from a year ago. Sales of single-family homes dropped by the same 0.6 percent and the median price ($279,300) rose by the same 5.2 percent.

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Designing lighting for biology

Michael J. Berens

Thursday, July 05, 2018

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Decisions about how best to light an interior space tend to be based on the types of activities for which the space is being designed. While that may aid occupants as they go about their tasks, depending on the space, that lighting may be inappropriate to maintain the body’s internal clock.

That, in turn, can lead to a number of health problems. Some recent studies suggest that it is possible to better balance lighting to benefit occupants’ tasks and biological needs.

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A seller’s market with few sellers

Michael J. Berens 

Wednesday, June 27, 2018

A seller’s market with few sellers

Historically, the second quarter is one of the busiest times of the year for home sales. Currently, however, high demand and prices have created a seller’s market, but few sellers.

That has been a boon for builders, but it also means many would-be buyers are shut out of the market at present.

Construction of new homes (in units) rose 5 percent in May, compared to April, the industry’s biggest increase since January, and is up more than 20 percent for the year.

Single-family construction for the month grew by nearly 4 percent. In addition, completions were up nearly 2 percent over April and 10.4 percent compared to last year, with single-family completions soaring 11 percent.

By dollar volume, new residential construction stayed more or less flat for the month, although it is up 5 percent over last year, according to Dodge Data & Analytics. Multifamily construction leapt 13 percent from April, while single-family fell 4 percent.

Despite the upward trend, builders have concerns that rising construction costs and mortgage rates may place a drag on future activity. The National Association of Home Builders stated that its Home Market Index, which measures builder confidence, decreased by two points in June, with builders reporting a slight slowdown in buyer traffic and decreased expectations for sales in the next six months.

Those sentiments were reflected in a drop in permit requests in May, down 4.6 percent from April, including a 2.2 percent drop in single-family permits.

Sales of new homes jumped 6.7 percent, the highest level since last November, and are up 14 percent for the year. Activity was greatest in the South, where sales rocketed nearly 18 percent compared to April.

The median ($313,000) and average price ($368,500) of a new home decreased somewhat from the previous month and the previous year, but were still well above the median sales price of an existing home ($264,800). Builders have been trying to hold down prices to make inventory more affordable, particularly for the underserved entry-level market.

Inventory of existing homes climbed in May, by 2.1 percent, which helped prevent sales sliding even more. The National Association of Realtors reports sales dipped only slightly, by 0.4 percent, following a 2.5 percent decline in April.

Sales of existing single-family homes dropped 0.6 percent. On the whole, inventories are down 6.1 percent compared to last May, and annual sales are off 3.0 percent. The shortage has resulted in rising prices (up 5 percent from a year ago) and a rapid turn-around, with more than half of available properties selling in 30 days or less.

Clearly, it is a seller’s market at present. Fannie Mae said that its Home Purchase Sentiment Index (HPSI) nosed up 0.6 points in May, to a new all-time high (92.3), largely due to a 46 point hike in the proportion of owners who said now is a good time to sell a home.

Ironically, those same conditions are keeping many homeowners from selling.

As Doug Duncan, chief economist for Fannie Mae, explains, “The perception of high home prices that underlies this optimism cuts both ways, boosting not only the good-time-to-sell sentiment but also the view that it’s a bad time to buy, and presenting a potential dilemma for repeat buyers.”

The net share of HPSI participants who believe now is a good time to buy plummeted 28 points last month. Consequently, the number of would-be buyers, especially renters, has fallen off. Mortgage lenders report demand for both home purchase and refinance mortgages have reached their lowest levels in three years.

Still, demand continues to outstrip supply. Pending home sales in May receded 0.5 percent on the heels of a 1.3 percent retreat in April and have been in decline for the past five months on an annualized basis.

The reason, said NAR Chief Economist Lawrence Yun, was not weakening demand but insufficient supply. Reversing the trend in new home sales, pending sales of existing homes were down in the South but up in the Northeast, Midwest and West.

Affordability is another challenge for the industry.

“With the cost of buying a home getting more expensive, it’s clear the summer months will be a true test for the housing market,” remarked Yun. At present, the NAR has already downgraded its economic forecast, anticipating negative growth for realtors by year’s end.

Continue reading A seller’s market with few sellers

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