Like many executives, Kristine Anderson, Assoc. AIA, recalls staring down her firm’s budget this spring and looking for ways to make cuts. Anderson, a managing principal at Peterssen/Keller Architecture in Minneapolis, which focuses on upscale residential work, was facing the uncertainty of an economy entering a standstill and made the decision to trim her company’s marketing spending. Would there even be business to try and capture?
That decision proved to be a good one—although not for the reason Anderson had anticipated. Nearly a year into a pandemic that reshaped the economy and the housing market, the architects at Peterssen/Keller have found that work is consistently coming their way.
“It’s amazing the numbers of calls we’ve gotten without doing anything differently,” Anderson says about a surprisingly busy second half of 2020.
In a year of dramatic shifts, the wholesale rebound—and even acceleration—of the single-family housing market has been a bright spot for an economy battered by shutdowns, lost jobs, and the tragedies of a pandemic. Twin trends—social distancing and remote work, and a large scale shift in activity from commercial to residential spaces—have fueled a boom in home buying and remodeling that experts believe won’t subside anytime soon, setting up extensive opportunities for residential architects. While the rental market flounders, with many moderate- and lower-income Americans struggling to stay housed, a bifurcated economy is allowing professionals who can still afford to take on a mortgage or renovate their home to weigh their options.
Anderson sees it in the requests she’s fielding from potential clients, who desire more connection with the outside via landscaping and additional light, as well as separation, including acoustical treatments, extra space, even an office “shed” in the backyard for privacy and focus. Industry analysts agree. Todd Tomalak, who studies remodeling for John Burns Real Estate Consulting, predicts that as the economy opens with widespread distribution of a COVID-19 vaccine, there will be a “bull run” in major, wall-moving renovation projects. He forecasts 37% growth in such spending through 2023 as compared to 2020.
The desire for new homes, which reached a crescendo in late summer and early fall last year, is also expected to continue through 2021. From roughly August to November last year, sales nationally grew 60%, according to John Burns, the real estate analyst and CEO of his eponymous consulting firm. Homebuilders can’t keep up; Robert Dietz, chief economist of the National Association of Home Builders, says that in October 2020, builders sold 28,000 homes that haven’t been built yet, double the number of unbuilt homes sold in October 2019. Danielle Hale, chief economist at Realtor.com, expects home sales will end up 7% year-over-year in 2020. While the pandemic-induced “sugar high” of buyers scrambling to find more space and move to the suburbs will subside—a burst that brought home sales to a 14-year high this fall—she sees continued strong growth for the foreseeable future.
“The mantra in the market is if you build it, it will sell,” she says.
This frenzy of activity and demand is prompting consumers and builders to figure out how to design and build homes that maximize functionality, says Mikaela Sharp, manager of trends and innovation at John Burns Real Estate Consulting.
“Builders were focusing on what they thought worked, and when COVID hit and the industry began realizing that people would be changed by this, it sparked a renaissance in research,” she says. “It’s not as much about how much consumers will change, it’s also that big builders are paying more attention. It’s amazing how much people just want a functional space after being locked inside.”
The COVID home and remodeling boom didn’t occur in a vacuum. The pandemic only served to hasten existing trends in real estate. Pre-2020, a strong demographic shift already supported increased homebuying and investment, says Alexander Hermann, a senior research analyst for the Harvard Joint Center for Housing Studies (JCHS). Millennials are aging into their prime homebuying years, but record-low interest rates and wealth inequality are also factors. The high-income groups who can afford today’s high real estate prices tended to escape many of this year’s layoffs and benefited from the stock market gains, what Hale calls a “tale of two markets.”
The result is that an economically mobile segment of society, often in the early years of raising a family and crammed inside for months, is dreaming of more space and is enticed by the best mortgage deals in history. While the overhyped “cities are over” storyline has proven false, it’s still true that suburbs and smaller and mid-size metros have seen big growth due to this pent-up demand, according to NAHB’s Dietz, with medium-density developments getting more attention from builders. He foresees a rising desire for urban infill and smaller multifamily projects over the next two to three years.
“Traditional growth centers like Tampa, Dallas, Houston, and Austin will benefit, but give Kansas City or Columbus, Ohio, a second look,” he says. “Whether it’s new construction or remodeling, there’s a lot to make from this increased demand for space.”
The Realtor.com forecast for next year’s hottest markets, which are collectively expected to see a 6.9% price increase and a 13.1% year-over-year jump in total sales, also points towards a continuation of a long-term shift towards smaller cities. The list—Sacramento, Calif., San Jose, Calif., Charlotte, N.C., Boise, Idaho, Seattle, Phoenix, Harrisburg, Pa., Oxnard, Calif., Denver, and Riverside, Calif.—consists of burgeoning Sunbelt metros, mid-size up-and-comers, and western cities providing alternatives to places like Los Angeles and San Francisco.
Second-home markets have also seen booms in sales and remodeling during the pandemic. According to Nilay Oza, AIA, principal of East Hampton, N.Y.-based architecture firm Oza Sabbeth, COVID-19 has brought in a significant number of new clients, from small remodels to new $4 million homes. Many have asked how to make their summer homes more robust for year-round living.
“In the grand scheme of things, COVID has made remote presence more acceptable,” he says. “Those who lived here 100 days a year before now tell us they want to up that to 180 days. They’re looking for a split lifestyle, clearly more than just weekends and summers.”
Though this year has already seen significant shifts in the markets, experts at John Burns believe the real boost in remodeling activity is yet to come. While homeowners were busy with renovations this year, resulting in double-digit spending increases, Tomalak says many were small-scale, often focused on the outside and typically around or under $1,500. In surveys with homeowners, he found many big-ticket updates, such as kitchens and bathrooms, have been put off, not canceled, and beginning in 2021, especially as a vaccine gets distributed, will proceed.
“Big project spending is historically correlated with design-build and remodel firms, the kind of blue-chip remodel shops that take your entire house and, with an in-house architect and designer, transform it,” he says. “That’s who should benefit.”
The theme of those upgrades and renovations will often be functionality. Even when workers return to the office, there’s a sense that work-from-home will persist in some form. Ellen Perko, AIA, associate principal and residential specialist at Boston-based CBT Architects, says that the main desire from clients is to rework space strategically. Open-plan homes, lacking flexibility and privacy, haven’t worked during the pandemic; homeowners want rooms that can double as offices and places to focus; entryways and mudrooms that provide clear breaks between the indoors and outdoors; and private outdoor space.
“The creation of an oasis is key,” Perko says. “People are thinking strategically about space for their families and how they can support their lifestyles.”
As Hermann at JCHS points out, it’s not necessarily about more square footage as much as it is about designing better and more usable space. Houses are already plenty big: From 1989 to 2015, the share of new single-family homes with four or more bedrooms rose from 28% to 47%, and in 2019, the average home was 2,300 square feet, up 24% from 30 years prior. Studies have found that 61% of households with five or fewer members have one or even two extra bedrooms. But those layouts haven’t been optimally designed for the challenges that have cropped up in the last year or for the future changes coming to work and consumer lifestyles.
That’s especially important for architects to consider, especially as we start to reach the pandemic’s end. What many Americans want out of their homes has changed. “Desires become needs,” says Perko, and the next phase of home design will be dominated by those who can incorporate the need for flexibility, privacy, and usable space into more affordable and attainable homes. The predicted boom in remodeling signals a desire for change, as Tomalak points out, as well as burgeoning opportunities for an industry that nearly a year ago may have thought the market was shutting down.
“You don’t write a six-figure check for a remodel if you’re not dissatisfied with your home,” he says. “That should be a big signal to builders and designers and architects.”
