The swift run-up in home prices has come back to bite developers of single-family homes, however, and the plunge in affordability is driving a shift in project type. With apartment rental fees creeping up as the rent/buy gap widens, Milbrandt says his clients are moving more heavily toward rental products. But they're also in sync with the national trend toward reducing the size of for-sale products to scoop up entry-level buyers. Seattle-area developers are also pushing density to save land costs.
“There's been a little bit of leveling out of the housing market here,” agrees Bill Kreager, FAIA, a principal at Seattle-based Mithun. “It's growing at a reasonable, but more conservative, rate.” Prices, however, are “horrible,” he adds. With the median price of a detached home there just under $400,000, the condo market is billowing. Mithun has 8,000 units in the pipeline for downtown Seattle. Although the business plan is a mix of everything except hospitals, housing has always been its strongest segment—from HOPE VI to high-end. That's still true, and Kreager believes it's because of a decision Mithun made not to do sprawl. Returning from a U.S. Green Building Council conference three years ago, Kreager laid down the law: The firm would no longer accept projects with less than eight units per acre. “People are seeking us out because of what we are doing, and we're still turning work away,” he says, adding that the firm's focus on green design is a double whammy in its favor. With 68 percent of its 200-some employees LEED-certified, “We have been able to pick and choose those builders who are really excited about sustainability,” he says.a conservative approach
Multifamily firms are following the lead of their developer clients and proceeding with caution. Steven Kodama, FAIA, principal of Kodama Diseño Architects, San Francisco, notes that nonprofit developers seem to be very, very busy. Kodama Diseño is working on a 100-unit affordable seniors project that is going full speed ahead. Other large projects on tap include $250-per-square-foot mid-rise condos in Richmond and Oakland, Calif. “By the time we're involved, there's a certain amount of commitment already made by developers in going through the entitlement process, but they are concerned about cost and what market they may be hitting,” Kodama says. “They seem a little bit more conservative.” He's seen no signs of slowdown, and although the firm is overloaded with work, he's reluctant to expand the payroll. “Looking to the future, we're reading our clients,” he says. “If they're cautious, we won't overextend ourselves. We're in need of help but are not going beyond the immediate staffing.”
Multifamily architects in East Coast cities seem to be landing on their feet too. Hickok Cole Architects, Washington, D.C., specializes in infill condos. None of its clients have switched to apartment buildings, nor have they pulled the plug on any jobs. “Our clients are gauging the market but not shutting anything down,” says principal Michael E. Hickok, AIA. “We still have people calling and asking for feasibility studies, and as long as we have those in the pipeline, a certain number of them are likely to turn into real projects. Even if things do slow down, we think the D.C. market is just generally so strong that it won't hurt us too badly.”
Even as homes in suburban areas languish, demand for urban dwellings appears to know no bounds. In Atlanta, for example, outlying areas have felt the downturn, but for Surber Barber Choate & Hertlein Architects, it's pretty much been business as usual. Principal Dennis Hertlein, AIA, notes that some developers are trying to pro forma their deals to cover condos or rentals, bracing for the worst-case scenario. But the nervousness abated somewhat as interest rates leveled off recently. For now, Hertlein is sanguine about the bubble, at least with regard to multifamily housing. “Traveling around, I definitely see the inner-city movement still strong,” he says. “Empty-nesters and first-time buyers are focusing on that aggressively.” He's noticed, however, that financing is getting tighter. “We're starting to see, for the first time in 10 years, presales being required for certain projects, which changes the paradigm a little,” he says.bang for the buck
For custom architects, the stagnant resale market is a drag on new business; let's face it, this isn't the best time to cash out an existing home. Orlando is one of those regions where builders put up too many houses, and when interest rates rose slightly, speculators went scurrying. Orlando architect John Henry, AIA, NCARB, says existing home sales are down 34 percent from a year ago, and that the 2005 hurricanes compounded the downturn. Homeowner insurance rates tripled over the year before, he adds, and some people who wanted to build custom are buying and remodeling existing homes.
Of course, Florida's four coastlines will always draw monied clients. “You can't compete with builders doing semicustom work,” Henry says of his focus on the luxury custom home market. Even if local conditions tank temporarily, he expects to stay afloat because 80 percent of his work is out-of-state or overseas. Still, he's upbeat about Orlando's state of affairs. “My peers locally are saying they feel the slowdown,” he says, “but they don't feel like everything is going to hell in a handbasket.”
The housing market may not be going to hell, but one gets the feeling that the shakedown is creating a national shape shift in both local demographics and domesticity as Americans go in search of equilibrium. Henry notes that many Floridians are decamping to North Carolina, where home prices are generally more moderate. Austin, Texas, architects are faring well, too, thanks in part to an influx of Californians fleeing an impossible real estate market. “They come in and think nothing of spending quite a bit more per square foot than people here are used to,” says Heather McKinney, AIA. The push toward downtown living is also generating business. “There are more than a dozen residential and mixed-use projects in construction,” she says. “There are cranes everywhere.”
If anything, the current crisis is prompting a harder look at how and where we live. Recently, several production builders contacted Minneapolis architect Sarah Nettleton, AIA, LEED AP, to start a conversation about how to do things differently. “They're saying they want a new way of thinking about things to differentiate themselves, and they're scratching their heads about what should change,” says Nettleton, whose book, The Simple Home: The Luxury of Enough (The Taunton Press), will be published in February.
Meanwhile, Mark A. Silva, AIA, principal of Silva Studios Architecture, San Diego, sees the downturn fueling interest in sustainable measures like solar power, rainwater collection, and smart technology. “It boils down to getting the biggest bang for your buck,” he says. “People are starting to understand that it's worth it to pay for good design.” He adds, “I've had longer waiting lists, but there are a couple of projects waiting for me now. I'm not too worried.”