Multifamily Housing Dominates November Architecture Billings Index

by Houston Agent

December 21, 2012

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The Architecture Billings Index for November promised strong returns in multifamily investment through 2013.

By Peter Ricci

The multifamily housing market continued its dominant performance in the American Institute of Architects’ (AIA) Architecture Billings Index, a leading economic indicator of future construction activity that is based on the billings from the nation’s architectural firms.

For November, the multifamily housing segment of the Architecture Billings Index was 55.9, the highest among the index’s four indicators; any number over 50 indicates an increase in billings from offices.

Architecture Billings Index – Strong Business Conditions

The Architecture Billings Index covers other sectors of the economy, and those were also very promising for residential housing:

Overall, the index was 53.2 in November, up from 52.8 in October; again, when the index is above 50, architectural firms are seeing more demand for their services.
The project inquiries index, which measures interest in new projects, edged up to 59.6, and every other segment of the Architecture Billings Index – mixed practice, commercial/industrial and institutional – were above 50 as well, with respective totals of 53.9, 52.0 and 50.5.
Finally, regional totals were also strong, with the Midwest and South boasting totals of 54.4 and 51.1.

Kermit Baker, the AIA’s chief economist, was highly positive towards the index’s findings.

“These are the strongest business conditions we have seen since the end of 2007 before the construction market collapse,” Baker said.

And of course, the stronger the nation’s business conditions, the stronger the residential housing market, as an improving economy leads not only to more move-up buyers, but also relocations and first-time homebuyers.

Multifamily Housing Swells

Among the segments of the Architecture Billings Index, though, it’s multifamily housing that warrants the most attention, particularly with how the index guarantees longer-term expansions of construction.

Though both construction data from the Census Bureau and the National Association of Homebuilders’ Multifamily Production Index showed very strong conditions in the present day for multifamily housing, the AIA estimates there is a nine- to 12-month lag between architecture billings and construction spending – which means we can count on more multifamily units down the road.