Cautious optimism for the housing recovery

Reading through the responses of this year’s Market Trends Report, it is apparent that respondents are cautiously optimistic for 2011. Many agree that 2009 was the worst year but 2010 fared better. It appears many are hopeful the industry is on an upswing and 2011 will be better than 2010.

Kermit Baker, director of the remodeling futures program for the Joint Center for Housing Studies at Harvard University, echoes this cautiously optimistic outlook. “I think it’s going to be a tough market for 2011, but some people are seeing some improvement from 2010,” he adds.

When asked in the survey if the outlook for 2011 is better than 2010, 40 percent said it will be better whereas 45 percent said it would be the same. “It’s not surprising because 2009 and 2010 were so atrocious,” Baker says.

Guarded business practices

Positive news from the survey results shows the majority of respondents expect their revenue to increase in 2011: 47 percent of architects, 57 percent of builders and 45 percent of design/builders. Comparing these numbers with the results of hiring more office staff, it’s clear that respondents are taking a more conservative approach to the changing economy. Seventy-six percent of respondents said they will maintain office staff levels this year; only 16 percent plan to hire more staff.

“A lot of folks who think their revenue is going up are also going to maintain staff levels. We hear a lot of that; we don’t want another round of layoffs if things get bad so we’ll get by with the staff we have,” Baker says. These people are not going to run out and hire more staff just because their revenue increases 5 to 10 percent, he adds.

While many are optimistic and expect their revenue to increase, many are turning to more remodeling work as the new construction market slowly makes its way back. Actually, more than half of respondents plan to do more remodeling in 2011: 67 percent of architects, 71 percent of builders and 78 percent of design/builders.

“They think [the remodeling] market is getting better and that’s consistent with what we are seeing. It’s encouraging. Remodeling will grow modestly in 2011,” Baker says.

Consumer concerns, demand

The top four threats to company growth may not be surprising to many: economy, client financing, declining home values and scared home buyers. “These are all inter-related. They are scared because home values are declining and the economy stinks. It’s all circling around a common set of concerns,” Baker adds.

With the elimination of the new home buyer tax credit, and the energy tax credit scaled back, it may not be surprising to some that the majority of respondents don’t know if they will generate more revenue from green products in 2011. Baker adds that the timing of this question may have changed the results; meaning because the survey was taken at the beginning of the year and before the Middle East/Libya conflict, respondents might have been responding to the energy tax credit being scaled back. However, if asked after the start of the Libya conflict and the increase in gas prices, respondents might have answered differently.

Baker wasn’t surprised that most said efficient HVAC and windows were the two most wanted green products. “The two I hear the most about are HVAC and windows so it makes sense,” he adds. “Those are the ones easier to get the energy tax credit for.”

Slow improvement

This year looks to be one that slowly makes its way back from the ashes of 2009. Many found 2010 to be an improvement from 2009, and it appears they think 2011 will be better than 2010. However, survey results reveal that custom home designers and builders don’t expect a drastic improvement to happen this year.

“I would say they are generally optimistic. Overall they think the market will increase this year,” Baker says. “It’s strong on remodeling and reasonably strong in new construction. This audience doesn’t think we are headed toward another dip.”