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Tag Archives: Michael J. Berens

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

The best methods for client presentations

Michael J. Berens

Wednesday, August 08, 2018

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The best methods for client presentations

While some still prefer the napkin sketch, architects and designers today have a battery of tools they can employ to convey their visions to clients and stakeholders. But which have the biggest impact on viewers?

It may seem a no-brainer that animated digital representations such as virtual reality (VR) and artificial reality (AR) win hands down. That, however, is not always the case.

Researchers who have studied the effect of digital A&D representations on client or stakeholder viewers almost always reach the same conclusion. What matters most is not the medium, but the message.

In other words, which method or tool is most effective depends on what you are trying to convey to the viewer or what you want them to experience.

A pair of researchers, Claudia Ziegler Acemy and Philip Kortum, with the Department of Psychology at Rice University in Houston conducted a literature review of research on the evaluations of and responses to an environment in three different conditions: the physical environment, a photograph, and a dynamic, virtual reality simulation. What they found is that responses tend to be very similar.

The researchers then tested whether photorealistic renderings of the environment would make a difference in viewers’ assessment of the usability of a space. Participants viewed one of two built environments by either standing in the physical space, examining a photograph of it, or looking at a rendering of it.

Again, the findings showed the type of medium had little to no impact on viewers’ assessments. They conclude that static, simulated images of the built environment, such as photos or photorealistic renderings, can be used in evaluations just as effectively as standing in the physical environment.

For the viewer who is not a designer or a builder, what matters is the context. What are they looking at and what are they supposed to evaluate?

If you want to wow a client, then dynamic, virtual representations are the way to go. They are the most impactful means of immersing the client in the proposed built environment. And it also helps that clients find the technology to be really cool. For other purposes, however, more accessible, less expensive media can work just as well or better.

It has also been suggested that the available media have not been exploited to their fullest. In a presentation at the International Conference on Design and Technology Educational Research (IDATER), David C. Chang and Peter Salzapaj of the School of Architecture at Sheffield University, demonstrated how computer-generated simulation can be used not only to render designs, but also to convey design ideas.

That is to say, the dynamic capabilities of the medium make it possible to share the designer’s design thinking with the viewer, not just the solution arrived at. Chang and Salzapaj note that for such an approach to be effective, viewers need to be trained in order to be able to observe the possibilities being presented to them.

More advanced or elaborate visual representation media do not necessarily lead to better decision-making. In fact, they can at times distract the viewer from focusing on what is important.

First, decide what information you need to convey to the viewer and what type of feedback you need from them. Then, choose the most appropriate visual medium for the context. Maybe that’s just a sketch on a napkin.

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About the Author

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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Biophilic hotel design is going mainstream

Michael J. BerensTuesday, November 20, 2018

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Biophilic hotel design is going mainstream

Beachfront properties, mountain lake resorts, luxury forest cabins, jungle hideaways, atrium lobbies — the hospitality industry has long known the value of attracting visitors with views of nature.

Recently, though, more hotels and hotel designers have been employing principles of biophilia to enhance guests’ connection to nature within their properties. What once seemed just an extension of eco-design is fast becoming a must-have feature to compete for the custom of discerning travelers.

Briefly defined, the term “biophilia” refers to our innate connection to nature. Although many of us live and go about our daily activities in highly artificial environments, deep down we feel most at home in the natural world.

Given the option, we will choose an environment with natural elements over one that lacks them. Moreover, we respond to spaces positively or negatively depending on whether we feel vulnerable or protected, as we would in nature.

In practice, designers instinctively have always drawn on nature as a source and reference for their designs. Biophilic design is a more conscientious, broader and evidence-based application of those natural principles to the built environment.

It includes the use of natural materials, natural colors, plants, daylighting, nature-replicating artificial lighting (e.g., circadian rhythm), access to and views of nature, prospects, and partitioned or refuge spaces, as well the siting of the property within or with views to impressive natural surroundings.

As a design approach, biophilia is well-suited to the hospitality industry for several reasons. Guests are attracted to properties with proximity to or views of nature, especially bodies of water. Many of today’s travelers, especially millennials, seek out eco-friendly hotels, and biophilic design expresses in a very concrete way a property’s commitment to the environment and sustainability.

Done well, it also adds to delivering a unique or memorable guest experience. And with health and wellness being very much on the mind of today’s travelers, biophilic design incorporates natural elements shown to have positive health effects, such as easing tension, reducing stress, and promoting a positive mood.

An outgrowth of eco and green design, biophilic design has been growing in popularity among hotels, resorts and spas for the past several years. It got a big boost last year, however, when a study conducted by Terrapin Bright Green, Interface and Gensler, entitled “Biophilic Design in the Hospitality Industry,” concluded that among its other benefits, biophilic design was proving to be a “differentiator in the marketplace.”

The study found that properties incorporating biophilic design could charge significantly more for otherwise similarly outfitted guest rooms, had higher rates of guest use of hotel spaces and facilities (such as lobbies, bars and restaurants), high levels of guest satisfaction, and strong marketing presence on online booking sites and traveler review sites, like Trip Advisor.

The hotel industry has since taken notice. Two recent articles, one on Hospitality Net and the other for Hotel Management, have cited the study’s findings while promoting both the financial and wellness benefits of biophilic design. Within the past year, more A&D and travel-oriented websites and blogs have reported on the trend, as well.

The authors of the study comment that given the overwhelming positive response from guests one might expect that more properties would be incorporating aspects of biophilic design than the researchers actually found. They speculate that perhaps limitations of space, location or budget might be the reason.

It’s worth noting, therefore, that biophilic design is quite scalable. It can begin with something as basic as adapting existing spaces through the use of natural colors, materials, plants, and water features.

Given the large proportion of properties that likely will be trying to catch up to this trend, it seems like a great opportunity for hospitality designers to offer their services to benefit their clients and their clients’ customers.

Continue reading Biophilic hotel design is going mainstream

Biophilic hotel design is going mainstream

Michael J. Berens

Tuesday, November 20, 2018

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Biophilic hotel design is going mainstream

Beachfront properties, mountain lake resorts, luxury forest cabins, jungle hideaways, atrium lobbies — the hospitality industry has long known the value of attracting visitors with views of nature.

Recently, though, more hotels and hotel designers have been employing principles of biophilia to enhance guests’ connection to nature within their properties. What once seemed just an extension of eco-design is fast becoming a must-have feature to compete for the custom of discerning travelers.

Briefly defined, the term “biophilia” refers to our innate connection to nature. Although many of us live and go about our daily activities in highly artificial environments, deep down we feel most at home in the natural world.

Given the option, we will choose an environment with natural elements over one that lacks them. Moreover, we respond to spaces positively or negatively depending on whether we feel vulnerable or protected, as we would in nature.

In practice, designers instinctively have always drawn on nature as a source and reference for their designs. Biophilic design is a more conscientious, broader and evidence-based application of those natural principles to the built environment.

It includes the use of natural materials, natural colors, plants, daylighting, nature-replicating artificial lighting (e.g., circadian rhythm), access to and views of nature, prospects, and partitioned or refuge spaces, as well the siting of the property within or with views to impressive natural surroundings.

As a design approach, biophilia is well-suited to the hospitality industry for several reasons. Guests are attracted to properties with proximity to or views of nature, especially bodies of water. Many of today’s travelers, especially millennials, seek out eco-friendly hotels, and biophilic design expresses in a very concrete way a property’s commitment to the environment and sustainability.

Done well, it also adds to delivering a unique or memorable guest experience. And with health and wellness being very much on the mind of today’s travelers, biophilic design incorporates natural elements shown to have positive health effects, such as easing tension, reducing stress, and promoting a positive mood.

An outgrowth of eco and green design, biophilic design has been growing in popularity among hotels, resorts and spas for the past several years. It got a big boost last year, however, when a study conducted by Terrapin Bright Green, Interface and Gensler, entitled “Biophilic Design in the Hospitality Industry,” concluded that among its other benefits, biophilic design was proving to be a “differentiator in the marketplace.”

The study found that properties incorporating biophilic design could charge significantly more for otherwise similarly outfitted guest rooms, had higher rates of guest use of hotel spaces and facilities (such as lobbies, bars and restaurants), high levels of guest satisfaction, and strong marketing presence on online booking sites and traveler review sites, like TripAdvisor.

The hotel industry has since taken notice. Two recent articles, one on HospitalityNet and the other for Hotel Management, have cited the study’s findings while promoting both the financial and wellness benefits of biophilic design. Within the past year, more A&D and travel-oriented websites and blogs have reported on the trend, as well.

The authors of the study comment that given the overwhelming positive response from guests one might expect that more properties would be incorporating aspects of biophilic design than the researchers actually found. They speculate that perhaps limitations of space, location or budget might be the reason.

It’s worth noting, therefore, that biophilic design is quite scalable. It can begin with something as basic as adapting existing spaces through the use of natural colors, materials, plants, and water features.

Given the large proportion of properties that likely will be trying to catch up to this trend, it seems like a great opportunity for hospitality designers to offer their services to benefit their clients and their clients’ customers.

Continue reading Biophilic hotel design is going mainstream

Making housing more affordable

Michael J. Berens

Wednesday, October 24, 2018

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Making housing more affordable

Historically, a robust housing industry has been a bellwether of a booming economy. At present, however, the economy is at its strongest point in 10 years, but the housing industry is limping along.

Recent projections indicate annual home sales will fall below those of last year. A number of factors are contributing to this situation, but the major one is affordability. For many Americans who want to buy a home, the cost is just too high.

“Affordability remains a huge concern,” says Inna Khidekel, managing director of capital markets for Bridge Investment Group, which leads a Workforce and Affordable Housing Initiative as part of its multifamily fund management program.

The firm’s research finds nearly two-thirds (62 percent) of renter households earn below 80 percent of their area’s median income (i.e., $45,000 a year or less). Only 41 percent of households can afford the median list price of a home in their area. In addition, individual household factors such as family size and health status can affect how much in housing expenses is manageable.

Rising home prices are placing a home purchase even further out of reach. In the third quarter of this year, home prices reached their least affordable level since the same period in 2008 — a 10-year low, according to ATTOM Data Solutions. The cost of home ownership is also increasing as prices and mortgage rates rise.

A study by the Urban Institute found that as of July 2017, the share of median income needed for the monthly payment with a 20-percent-down mortgage on a median-priced home stood at 22 percent, up from 18 percent five years ago. The study also forecast that if rates rose to 4.75 percent (they have been hovering between 4.71 and 4.79 in the past few weeks), the share of income would increase to an average of 24 percent.

The problem has been growing for some time, as builders, pressed by increased construction costs and regulation, have opted to build more large homes and luxury homes that command higher prices.

In its 2018 State of the Nation’s Housing report, the Joint Center for Housing Studies at Harvard University (JCHS) states, “the share of smaller homes (under 1,800 square feet) built each year fell from 50 percent in 1988 to 36 percent in 2000 to 22 percent in 2017. Of this latest drop, 9 percentage points occurred in 2010-2013 alone.”

Between 1999 and 2015, in contrast, the share of large homes nearly doubled, from 17 percent to 31 percent. During this period, most multifamily construction has been focused on rental properties, not on condos or townhouses — popular starter-home options — whose construction has fallen by half.

Analyzing data from this year’s third quarter, Trulia relates that although housing inventories improved somewhat, starter homes are the hardest to find, comprising only one-fifth (20.9 percent) of the total market. MetroStudy chief economist Mark Boud, in his Q3 housing forecast, noted that homes for sale below $200,000 were scarce, while inventory at $400,000 and above was increasing.

The shortage of affordable homes to buy has heightened the demand for rental properties, driving up rents. CNBC reports rents in the third quarter of this year rose 2.9 percent compared to a year ago, up from 2.5 percent in the second quarter. JCHS found one-third of households in 2016 paid more than the 30-percent-of-income recommended industry standard for housing.

Moreover, adds Khidekel, some 12 million households spend more than 50 percent of their annual income on housing. They are among those experiencing what JCHS terms “shelter poverty,” that is, not having enough to cover basic necessities after paying for housing. Under such constraints, setting aside funds toward the purchase of a home is nearly impossible.

Most industry analysts agree the present situation is not sustainable, but at present it is difficult to see a way forward. Some point to low unemployment and a strong economy as a hopeful sign. However, rents, home prices and mortgage rates are increasing at a much faster rate than wage growth.

Others point to the millennials reaching household formation milestones. Yet, data from Freddie Mac estimates that 700,000 young adults refrained from buying a home between 2000 and 2016 because costs outpaced income growth.

The latest ValueInsured quarterly Modern Homebuyer Survey shows less than half (48 percent) of millennials believe buying a home is a good investment — a record low — compared to more than three-quarters (77 percent) a year ago.

More and more affordable inventory is needed, of both new and existing homes, and soon. In an article for Forbes magazine, John McManus, a content director with Hanley Wood’s Residential Group, calls for an “all-out blitz of lower-priced, entry-level homes.”

He and a number of other experts suggest that wider use of new technologies and modular construction techniques, as well as changes in business practices, could help lower the cost of building a home. Trade and professional organizations have called for less regulation, which adds costs and delays to projects.

Some builders have begun to introduce models with smaller footprints and fewer frills to appeal to more economy-minded millennials. Others, like Bridge Investment Group, are investing in preserving,restoring and rehabilitating already existing buildings, thus holding down construction costs, especially in lower-income areas.

This is not just a housing industry issue. In a number of metropolitan and suburban areas around the country, providers of basic and valuable services, such as police, fire and emergency personnel, teachers, and healthcare professionals and paraprofessionals, cannot afford to live where they are needed. For the sake of our communities and society’s stability as a whole, the cost of housing needs to scale back to a level that most, not just some, Americans can afford.

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Using design to curb aggression

Michael J. BerensThursday, November 08, 2018

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Using design to curb aggression

Within the past five years, American society has become increasingly angry, belligerent and aggressive. It may be due to the intense stress of daily life, to fallout from the last recession, to income or racial inequality, to political and regional polarization, to the nature of much popular entertainment, to the fractured news media, to the no-holds barred invective popular on social media — or due to all of them.

Whatever the reasons, as a society we need to look for ways to alleviate and prevent aggression, especially in public spaces. Research shows design can help.

The impact of interior design on inciting or alleviating anger and aggression has not been widely researched. However, some seminal studies have identified key factors that designers should take into consideration when creating spaces for groups of occupants.

One of the earliest is MacIntyre and Homel’s 1997 study of the link between crowding and aggression in nightclubs, entitled “Danger on the Dancefloor.” Based on observations conducted at 36 nightclubs, they noted that aggression tended to increase in venues where crowding was exacerbated by inappropriate flow patterns, particularly around high-use or high-density areas, such as entry and exit doors, bars, restrooms, and dance floors.

They recommended that building standards be established to reduce the number of pedestrian cross-flows to minimize abrupt physical contact that could result in an angry or aggressive response.

In addition to crowding, a 2001 literature review of research on violence and crowding by Kumar and Ng found lack of privacy and personal control also could trigger aggressive behaviors. Examining the characteristics of the built environment that affect the mental health of occupants, Evans (2003) also cites studies showing the negative impact of noise, poor indoor air quality and inadequate lighting, as well as crowding.

Interestingly, despite the number of studies and articles on the effects of color on mood and cognitive performance, Evans finds no evidence of color having a negative impact on mental health.

Heerwagen and Hase (2001), in their paper on integrating principles of biophilia in the built environment, discuss how elements from nature associated with threats or vulnerability — what they term “biophobia” — can give rise to occupants’ sense of apprehension or anxiety. These include enclosed spaces, heights, and a sense of gloom caused by poor lighting, and ill-lit perimeters or corners.

Along similar lines, Parashar and Sikawar (2018), who were looking at ways to increase the amount of positive space in an interior environment, warn against creating negative space (such as space that is non-functional), avoiding colors that have a negative association for the occupants, and the use of sharp or pointy shapes. In their study on people’s reactions to objects encountered in the physical environment, Bar and Neta (2006) also conclude that people prefer curved visual objects, as sharp or pointy objects and sharp transitions in contour may convey a sense of threat.

These findings have practical applications for how spaces can be designed to curb emotions that can trigger aggressive behavior. An independent post-occupancy study of a redesign of the accident and emergency department in two British hospitals found that improved signage, wayfinding and spatial clarity contributed to cutting aggression against hospital staff by 50 percent and reduced the incidence of swearing and other offensive language by 25 percent.

A team led by Roger Ulrich recently published the results of a study they conducted in Sweden using a conceptual model developed to reduce aggressive behavior in a psychiatric ward through design of the physical environment. Drawing on previous research demonstrating the link between crowding, stress and aggression, they identified 10 “evidence-grounded” stress-reducing features and compared them against an environment that lacked most of these features.

Staff in the model environment reported a decrease in the use of injections and the use of restraints used to control aggressive behavior. Among the features included in the model are noise control; individual patient rooms with private bathrooms; more personal control in patient rooms and communal areas with movable furniture; nature views, gardens and nature art; and use of daylighting.

By eliminating or diminishing environmental factors that contribute to occupants’ sense of displacement, fear and anxiety, designers can help defuse the negative emotions that can trigger anger and aggressive behavior. At the same time, through positive design, these spaces express a recognition and respect for occupants, acknowledging their needs and preferences, and thereby connecting them to the humanity of others around them.

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Signs point to improving business conditions for designers

Michael J. BerensThursday, May 10, 2018

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Signs point to improving business conditions for designers

After several months of declining growth, the interior design industry showed signs of regaining momentum in the latter part of the first quarter.

Both residential and commercial sectors have experienced increased activity in recent months. The upward trend has boosted designers’ expectations that demand will continue to grow in the months ahead.

Presently, the outlook for design firms remains very positive, according to the American Society of Interior Designers. Its latest Interior Design Billings Index (IDBI), for March 2018, rose 2 points for the month, to 58.5, its highest level since June of last year.

Even though the business inquiries index dropped somewhat from February, designers expressed increased optimism about their prospects in the months to come. The six-month outlook index in March climbed more than 6 points month-over-month, to 62.7.

That optimism is reflected as well in the findings of the just-released 2018 U.S. Houzz State of the Industry report. Interior designers who participated in the survey anticipate substantially higher revenue growth for the year as compared to 2017.

More than three-fourths of residential designers believe revenues will be higher this year, by as much as 11.1 percent on average, resulting in higher profitability. In addition, more than two-thirds expect demand for services will increase as well.

In last year’s Houzz State of the Industry study, nearly one-third of designers had voiced concern about the difficulty of finding prospective customers.

As an indication perhaps of how the market has shifted in recent months, this year nearly the same proportion expressed concern about the shortage of contractors instead. Again this year, managing client’s expectations, particularly in regard to costs, remain the primary concerns of a majority of designers.

Most of the demand for residential design services (about 70 percent) comes from renovation and remodeling projects of existing homes. About 20 percent comes from design of newly built custom homes or new homes for sale.

However, designers in this year’s Houzz study reported a notable increase in commercial design projects as well — 13 percent in 2017 versus 7 percent in 2016. This may be an indication that firms are diversifying more to expand their markets, given the relatively static market growth for interior design services within residential remodeling and design industry overall. It may also be a reflection of the growing crossover between residential and commercial design in sectors like office, hospitality and health care.

Adding support to designers’ optimism are recent encouraging indicators of continued strong demand for remodeling services for the foreseeable future.

In its most recent Leading Indicator of Remodeling Activity (LIRA) forecast, the Joint Center for Housing Studies of Harvard University projects continuing robust homeowner remodeling activity, with overall growth remaining above 7 percent for the remainder of this year and into the first quarter of 2019.

MetroStudy’s National Residential Economic Report for the first quarter of 2018 contains a similar projection. The National Association of Home Builders reports that its Remodeling Market Index (RMI) for the first quarter of 2018 shows the remodeling industry is on “solid footing” and projected to achieve revenue growth this year.

On the commercial side, the American Institute of Architects’ Architecture Billings Index (ABI) for March shows an upward trend and increased activity in the commercial sector month-over-month.

The Dodge Momentum Index also was up for the second month in a row in April, jumping 6.1 percent over March, led by “aggressive growth” of 6.3 percent in the commercial sector. The institutional sector experienced a healthy but more modest growth of 5.8 percent.

As with remodelers, architects and builders, interior designers are facing challenges of rising labor and materials costs along with shortages of qualified labor that may cause delays or project backlogs. In the main, however, current indicators suggest that designers can expect continued demand for their services and positive growth overall this year.

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Multifamily steps up to fill the housing gap

Michael J. Berens Wednesday, April 25, 2018

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Multifamily steps up to fill the housing gap

With little relief in sight, sales and starts of single-family homes tumbled in March. Would-be homebuyers faced with fewer choices, along with rising prices and interest rates, are opting to continue renting for the time being or to purchase more plentiful and often more affordable townhouses, condominiums and co-ops. That has given a boost to the multifamily sector, which rebounded strongly in the first quarter of this year.

Overall, sales of existing homes increased for the second month in a row in March, but at a slower pace than in February, 1.1 percent vs. 3.0 percent, respectively. Single-family home sales, however, remained relatively flat (up just 0.6 percent, and down 1.0 percent compared to last March), constrained by bad weather and continued shortages of available and affordable inventory.

The median sales price of a single-family home ($252,100) is now nearly 6 percent higher than it was a year ago. Condo and co-op sales, although also lagging behind last year’s figure, rose 5.2 percent for the month, following a 6.5 percent decline in February. Condo prices have risen more slowly and often are more affordable for first-time buyers. The median sales price for an existing condo in March was $236,100.

Scarcity of existing homes for sale helped push sales of new homes in March up 4 percent to their highest level since last November. The U.S. Commerce Department also revised figures for February upward, thus improving the first-quarter performance numbers. New home sales ended the month 8.8 percent higher than they were a year ago.

The median price of a new home reached $337,200 (up 4.8 percent from last March). However, the average sales price was $369,900, well above the affordability level of many prospective homebuyers.

Wintry weather may also be partly responsible for the weakening in single-family building activity in March. While residential construction rose by nearly 2 percent for the month, new single-family construction starts (in units) fell by 3.7 percent, following a near 3 percent increase in February.

In addition, single-family permit requests experienced their biggest monthly decline in seven years, down 5.5 percent, and completions dropped 4.7 percent. Multifamily starts, on the other hand, soared 14.4 percent, lifting industry activity for the year to nearly 11 percent above the same period last year.

Noting the volatility in construction figures from month-to-month due to the influence (or lack) of large projects, Dodge Data & Analytics reported a 2 percent decline in the value of residential construction in March, largely due to a 7 percent drop in the value of new multifamily projects. However, that came on the heels of a 6 percent gain in January and a whopping 36 percent hike in February. The value of single-family construction remained unchanged, holding more or less the same pace for the past several months.

Despite the rather tepid start to the year, builders remain optimistic about business conditions going forward. The National Association of Home Builders measure of builder confidence, the Housing Market Index, which had been at or above 70 for the previous five months, dipped just one point in April.

“As we head into the spring home buying season, we can expect the market to continue to make gains at a gradual pace,” observed NAHB Chief Economist Robert Dietz, citing the bad weather in parts of country as a dampening factor in March.

On the consumer side, demand for buying a home remains strong, with both Fannie Mae and the National Association of Realtors reporting prospective buyers were feeling positive in March about current home market conditions. However, many of those potential buyers may have to wait.

The long-range trend, according to MetroStudy’s most recent five-year residential economic forecast, is for a continued environment of undersupply and increasing costs that may not level out for several more years.

Continue reading Multifamily steps up to fill the housing gap

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