Custom Market Remains Healthy, Active

The effect the general housing slowdown has had on the custom home market has been relatively minor, despite the subprime mortgage crisis’ damage to the economy. Most custom home professionals (about 80 percent) retain a positive outlook on the 2008 market, according to our 2008 Market Trends Survey.

In a period when home values have dipped for the first time in decades, and housing starts have taken a sharp drop, more than 90 percent of design firms and custom building companies plan on either hiring more staff or maintaining current employee levels through 2008. Our survey results indicate only 3 percent of architecture firms, 6 percent of design/build firms and 9 percent of builders plan on reducing staff. This is good news for the custom home market.

Our survey also reveals only 15 percent of RDB readers report a decrease in the amount of square footage in the homes they designed or built in 2007; virtually no change from 12 percent in 2006. Of the remaining 85 percent of readers, far more (65 percent) report 2007 square footage levels as flat compared to 2006 (40 percent), and far fewer (20 percent) saw an increase in the amount of square footage in 2007 compared to 50 percent in 2006. Based on these numbers, it’s clear that custom homes did not get smaller in 2007; they just didn’t get much larger.

Not all the news was positive. Key indicators from this year’s survey point to concern about the general housing market slowdown, fear of rising material costs, and a slight decrease in profit margins. However, data reflects only a slight downturn and nothing to suggest the custom market is in danger of collapsing.

While it’s true more of our readers this year chose “poor” as their outlook on the market than did last year, compared to historically low market confidence levels from production builders this February, the custom market is doing relatively well.
Results of the American Institute of Architects’ Home Design Trends survey released in February confirm the custom market is doing better than the production market. In its survey, the AIA compares the percentage of respondents reporting improving vs. weakening conditions. Architects designing custom/luxury homes report a -15, but the move-up and first-time home designers report -45 and -64 respectively. Yes, the custom market has dipped slightly, but not nearly as much as the production market slide.

In the Home

RDB readers identified the most asked-for rooms and features in 2007, and the top five from last year’s survey turned up in the top seven this year. Multipurpose family/media rooms were the most requested feature in 2007, followed closely by energy efficiency and a home office, which was first on last year’s list. For the rest of the list see the chart on page 30.
Once again our survey results reveal a disconnect exists between what homeowners want and what they pay for. As stated previously, media rooms were the most requested room in 2007, but home electronics is one of the first products sacrificed when budgets get tight.

“Buyers have sugarplums in their heads,” says Mark Perlman, president, Empeco Custom Builders in Grayslake, Ill. “They want all this great stuff and when push comes to shove, they don’t do it. With electronics, for example, we find a lot of people are wiring for sound because it’s cheap to put in wire, but they won’t put in the speakers until later. Electronics is not like countertops where you can wait to buy one later. We don’t push anyone into something. If they want it, great; if they don’t, fine. It’s whatever they want and what the budget allows.”

Getting It Done

Builders historically report difficulty finding good subcontractors, and 2007 was no different. RDB asked readers which trades are the most scarce in their area. Across the country, survey respondents ranked electronics integrators (19 percent) as the least plentiful, with finish carpenters (18 percent) and framers (13 percent) taking second and third. The rest of the list includes, in ranked order, concrete, plumbing, electrical, roofing, HVAC, painting and landscaping.