Housing Market Setback? Index Shows Less Work for Architects

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AIA billings downThe wobbly economic recovery is looking a bit wobblier, if you consider the Architecture Billings Index put out by the American Institute of Architects, which reflects not only how much work architects are getting but also suggests the status of construction spending and the overall health of the housing and real estate markets.

After three months of climbing out of a recession-induced hole, the index suddenly sank back in May to 45.8 from 48.4 the previous month, a relapse from what was touted as a sure signs that business was improving for designers, contractors and developers.

"This caught us off guard after a string of good months in the right direction," says Kermit Baker, the AIA's chief economist.
Baker notes that any index number below 50 still indicates an anemic market trying to right itself.

What caused the reversal? Take your pick: the jittery stock market, a less-than-stellar employment rate, the lingering European debt crisis, that oil spill in the Gulf, or Brazil being knocked out of the World Cup.

Well, it could be just about anything that sours anyone's eagerness to invest. So, where do we go from here?

Baker says that for the most part banks and financial institutions remain skittish about loaning money to get projects going, which clogs the pipeline of development that often starts with a call to an architect's office.

Caution reigns supreme when it comes to starting a building, be it a high-end residence, or an office tower, or pouring money into a renovation when commercial rents are in the doldrums.

All true, but let's look on the optimistic side. A deadline for the housing tax credit has been extended and Congress is considering legislation to help lenders and borrowers and free up credit. These moves might lead to at least a stabilization of the market and some risk-taking on the part of developers or anyone else who might want to sign up an architect.

"We're still trying to find the bottom of the market," Baker says, "and hopefully that's not too far away."

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