Despite years of increased demand for larger home and lot sizes, the findings of the quarterly AIA Home Design Trends Survey released this week indicate waning interest in additional square footage. This iteration of the survey delves into home and property design activity during the first quarter of 2017, based on responses from more than 500 residential architecture firms.

Home and Layout Design

The first quarter findings echo sentiments conveyed in the results of last quarter's survey—older buyers and homeowners want features that will allow them to age in their home as their mobility decreases, while younger buyers desire affordable product, which often equates to a smaller home. Overall, 19 percent of surveyed firms reported that square footage is on the rise, but the results vary by residence type. Square footage is more likely to increase in upper-end residences (29 percent of firms reported), while only 14 percent of firms reported size increases in residences categorized as entry-level.

“With younger households that are increasingly entering the market looking for more affordable options, home sizes appear to have peaked for this economic cycle,” said AIA chief economist, Kermit Baker, Hon. AIA, in a press release. “For aging owners, accessibility continues to be a high priority.”

Change in Demand for Larger Home/Lot Size

As seen last year, interior design elements intended to aid aging-in-place continue to top the list, with in-home accessibility, single-floor design, and open space layouts (that allow better mobility) making the top five list of requested features. However, demand for these features (although still significant) has been trending down since 2015. Two features new to the list are accessory/rental units and micro homes, which have been increasing in popularity for the purpose of additional income and lower cost, respectively.

Residential Demand for Key Features

Outdoor Living and Landscaping

Outdoor living spaces and features that allow seamless indoor-outdoor living (such as glass wall systems) are still the most popular way to utilize outdoor space for homeowners. Many homeowners see outdoor living spaces as a way to add value and functional space to their residences (especially as demand for larger houses wanes), a finding further supported by the increased demand for outdoor kitchens seen in the fourth quarter survey results.

Demand for Outdoor Living Features

The low supply of land at an affordable price and the high cost of development has made it difficult for many builders to provide affordable product for first-time or entry-level buyers. As a result, lot sizes continue to trend down, and siting homes in a way that maximizes minimal available space has become paramount. This sentiment is substantiated by the first quarter survey results, as the top three issues for property enhancement reported by respondents are lot preparation, low-irrigation landscaping, and increased building density.

“As building lots continue to be smaller and scarcer, lot preparation with the goal of maximizing livable outdoor space tops the list of property enhancement desires,” Baker said.

Business Conditions

Remodeling accounts for the largest share of business activity among the sectors responsible for the majority of work in the first quarter, a trend seen since the recession. Specifically, home additions and alterations account for the largest share of activity, followed by kitchen and bath remodels. Most significantly, the first quarter report shows a 9.9 percent increase in design activity in the first-time/entry-level buyer segment, indicating that younger buyers may indeed be starting to enter the market. Demand for second homes and vacation homes continues to decline, from 7.5 percent last year to -2.3 percent in 2017. The decline in activity during the first quarter also follows a -10 percent drop reported in the fourth quarter of 2016.

Business Conditions by Construction Segment

As we reported last week, the Architecture Billings Index posted a healthy score of 50.9 in April, with project inquiries at 60.2. (Scores below 50 represent a contraction in the market, while those above indicate growth.) “Billings and inquiries at residential firms are nearing a two-year high in terms of the pace of growth,” said Baker. “Those factors, along with a sizable jump in demand with first-time home buyers is a signal the custom residential housing market will be stable for the foreseeable future.”

Read the full report here.