The American Institute of Architects (AIA) describes June's 0.2-point increase in the most recent Architecture Billings Index (ABI) as "negligible." June's ABI rating was 46.0—a slight increase from May's score of 45.8. The previous three months (February through April) saw promising improvements in demand that peaked at 48.5 in April, however, any score below 50 indicates low billings.
Whether this reflects nothing more than a temporary dip in the recovery or the beginning of a longer downward trend remains to be seen, but the AIA's chief economist, Kermit Baker, Ph.D., Hon. AIA, is optimistic that the currently soft conditions at architecture firms will improve before the end of 2010.
According to the AIA's recently published semi-annual Consensus Construction Forecast for non-residential segments, the ABI should show actual gains by late 2011.
Despite the continuing low demand for actual architecture services, the score for new projects inquiries has remained high, with scores above 50, though it has wobbled back and forth in the past several months—from 52.2 in February to a high of 59.6 in April, followed by a slide to 55.5 in May, and then an increase to 57.7 in June. According to Jennifer Riskas, AIA's manager of economic research, the high new projects inquiries scores are due to project owners shopping around for the best bid and sending out many more RFPs than they would have in previous years. "This is translating to increased inquiries at firms, but not necessarily to increased projects," says Riskas.
Though the ABI doesn't address the single-family residential sector, data collected in the First Quarter 2010 AIA Home Design Trends Survey shows a score of 50 for residential architecture billings and a score of 62 for new projects inquiries. However, she notes that these numbers are a sharp increase over the Fourth Quarter 2010 residential billings index and may be attributable to the spring deadline for the new homebuyer tax credit.
The commercial/industrial sector shows the strongest of the June numbers with a score of 50.6, a slight decline from its 51.3 score in May, followed by multifamily residential at 46.5 (compared with 46.9 in May), institutional (45.0 in June, up from 43.4 in May), and mixed practice (44.7 compared with 46.8 in May). The regional breakdown shows the Northeast continuing to lead with a score of 47.7, followed by the South (46.7), Midwest (46.3), and West (43.6).
Perhaps not surprisingly, considering the recent deadline for the federal new homebuyer tax credit and slackening demand for new homes, the U.S. Census Bureau's June "New Residential Construction Report" shows declines in housing permits and starts, but increases in housing completions.
After peaking in March at a rate of 685,000, building permits for privately owned housing units dropped in both April and May, but rose slightly by 2.1 percent in June to a seasonally adjusted annual rate of 586,000. Permits for single-family units in June dropped 3.4 percent to a rate of 421,000, while permits for units in buildings of five or more units rose 20.8 percent to a rate of 145,000.
Housing starts in June, however, declined across the board. Overall starts of privately owned housing units fell 5 percent from May to a rate of 549,000. Single-family housing starts declined just 0.7 percent to a rate of 454,000, and starts of units in buildings of five or more units dropped 19.3 percent from May. Completions for all housing types increased significantly in June by an overall 26.2 percent to a seasonally adjusted annual rate of 886,000—11 percent above the June 2009 rate of 798,000. Single-family housing completions increased 31.3 percent from May to a rate of 676,000, and completions of units in buildings of five or more units rose 11 percent.
According to the latest National Association of Home Builders/Wells Fargo Housing Market Index, released prior to the Census Bureau report, homebuilder confidence in the new single-family home market declined for a second consecutive month, scoring 14 in July. (Any score above 50 indicates that more builders view market conditions as good rather than poor.)
Builders surveyed noted that many new-home sales were fast-tracked in the spring to meet the deadline for the new homebuyer tax credit, cutting off much of the potential for summer sales. Builders also reported that consumers are hesitant about investing in a new home while the economy's recovery is still uncertain, and that lending institutions are still restricting the flow of credit.
However, NAHB's chief economist, David Crowe, echoes the optimistic outlook of AIA's Kermit Baker. "We do believe that favorable factors such as low mortgage rates, affordable prices, and demographic trends will revive consumer demand for new homes this year, and that new-home sales will improve by 10 percent in 2010 from 2009," he said in an announcement about the NAHB's Housing Market Index.