Findings of the quarterly AIA Home Design Trends Survey indicate that market saturation in urban areas—and the resulting shift of development back to suburban areas—has caused demand for some community features related to accessibility to level off. This iteration of the survey delves into neighborhood and community design activity and the popularity of home exterior features during the third quarter of 2017, based on responses from more than 500 residential architecture firms.

Community Development Trends

While residential design trends have changed minimally during the economic recovery, community design trends have shifted more toward infill development, largely in response to higher levels of migration to dense areas. Growing demand for infill development, tear-downs, walkable neighborhoods, and access to public transportation have been a fixture of the AIA's third quarter report the past four years, but growth has appeared to plateau as of the third quarter in 2017.

“Intense development pressure on urban neighborhoods seems to be tapering as more development swings back to suburban and exurban locations,” said AIA Chief Economist, Kermit Baker, Hon. AIA in a press release. “Though homeowners still desire access to community amenities, these results reflect a slowing of migration toward more dense neighborhoods.”

Popularity of community features related to high density development remains strong (the top three trends remain unchanged from a year prior, although tear-downs moved to number three, below demand for mixed-use facilities), but a significant change year-over-year clearly illustrates a changing housing market. Less survey respondents reported that popularity of two of the top three trends had increased in 2017 compared to a year prior: infill development (59%) dropped 13% from the 2016 report (68%), and respondents reporting an "increase in tear-downs" (56%) dropped 17% from the 2016 report (68%).

As infill development and tear-downs speak most directly to the needs of urbanization when people move closer to city cores, the third quarter report could be showing the undercurrent of millennials who are ready to get out of the rental market and want to buy a home—but can only afford one further out in the suburbs.

Home Styles and Exteriors

The three most popular home style trends were unchanged from last year's report; firms saw highest demand for contemporary home styles, front/side porches, and smaller homes that place emphasis on style. Consumers still have a strong preference for contemporary styles with 40% of respondents reporting increased demand in 2017 (although down slightly from 43% in the third quarter a year prior), but demand for smaller homes that place emphasis on styling, and the preference for front/side porches appeared to soften.

Low maintenance materials and additional, larger windows are still the most important exterior home features for consumers. Despite a slight decline from 2016, demand for windows is expected to remain among the top three in 2018, especially as building technology progresses and new products like smart glass windows hit the market.

“Homeowner priorities remain consistent, with low maintenance building materials topping the home exterior features list,” Baker said. One significant change to the survey results was the rising popularity of accent and dark sky compliant lighting, which jumped from number five last year to the third most popular exterior home trend this year.

Business Conditions

The third-quarter report indicates continued recovery in the overall housing market, as evidenced by the AIA's latest Architecture Billings Index (ABI). The ABI posted strong growth in November, with the billings portion of the index rising 3.3 points month-over-month to a score of 55.0—the highest level seen in 2017 (the December ABI will be released in January).

“Not only are design billings overall seeing their strongest growth of the year, the strength is reflected in all major regions and construction sectors,” said Baker in a press release. “The construction industry continues to show surprising momentum heading into 2018.”

Among construction segments responsible for the majority of work in the third quarter, remodeling accounts for the largest share of business activity, and has outpaced new construction in each of the quarterly reports since the recession began. Specifically, home additions and alterations account for the largest share of activity, followed by kitchen and bath remodels.

Softening in entry-level, move-up, custom/luxury, and second/vacation home sectors during the third quarter is typical of seasonal slowdown, but the higher than usual decline in second/vacation homes could indicate consumer uncertainty about the economy. The significant increase in townhouse/condo activity—up 45% from 2016's reported 11%—could possibly speak to the issue of affordability in many markets, as significant price growth of both new and resale single-family homes has priced many potential buyers out of the market.

However, Baker is not concerned about activity in the new construction segment, and the AIA's first and second quarter reports both indicated that design activity in the first-time/affordable buyer segment increased year-over-year (most notably by 10% in the first quarter).

“Business conditions at residential architecture firms remain strong across all regions," Baker said in a press release. However, "improvements to existing homes continuing to top the list for specific residential sectors.”

Read the full report here.