Demand for design services in all sectors and new residential construction activity remain stalled because of the slow-moving economic recovery and tightly restricted access to credit for projects, the latest data indicates.

After rising to a height not achieved since January 2008 in September, the American Institute of Architects' (AIA) Architectural Billings Index (ABI) dropped two points in October to a score of 48.7. September's ABI of 50.4 marked the first increase in demand for design services that occurred in more than two and a half years, but October's dip below 50 indicates a return to negative territory and a decrease in demand. However, demand was at the same level in October as it was before September's two-point jump.

On a somewhat brighter note, new projects inquiries remained extremely high in October, scoring 61.7, down slightly from 62.3 the previous month. The commercial/industrial sector lead October's ABI with a score of 54.5, followed by institutional (50.8), multi-family residential (49.1), and mixed practice (43.2).

The negative turn in billings is disappointing, notes AIA chief economist Kermit Baker, but not surprising. "We were anticipating a slow recovery period and it is likely that there will be some fits and starts before conditions show consistent improvement," he said in an announcement about the ABI. Baker pointed to lenders' reluctance to provide credit for construction projects and the overall sluggish economy as the main roadblocks to improving demand for architectural work.

Residential construction activity continues to fluctuate, as well. The October 2010 New Residential Construction report released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development showed minor increases in housing permit issuance accompanied by slight to moderate declines in single-family housing starts and completions. Multifamily construction, on the other hand, experienced severe drops in October, the second month of sharp declines after peaking significantly in August.

Overall residential authorizations crept upward in October at 0.5 percent to a seasonally adjusted annual rate of 550,000, while single-family permits rose by 1.0 percent and permits for units in buildings of five or more units ticked up by 0.8 percent.

Starts declined overall in October by 11.7 percent, mostly fueled by a 47 percent fall in the five-or-more-units multifamily category. Single-family starts declined only 1.1 percent below September's rate, to a seasonally adjusted annual rate of 436,000.

Completions in October were more mixed. The rate of completions of units in buildings of five or more units dropped 20.1 percent to a rate of 107,000, driving overall completions down 3.2 percent. Single-family completions increased by 2.7 percent, however, to a rate of 501,000.

Despite such mixed activity and demand, home builder confidence, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), improved incrementally in November. The HMI ticked upward by one point since October to 16. According to the NAHB, the future expectations component of the HMI rose by two points in November to 25 on the heels of a five-point gain in October. NAHB chief economist David Crowe notes this is the highest that future expectations have been since the home buyer tax credit program drove higher sales in the spring. However, surveyed home builders still report no improvement in access to credit for construction projects.