In this issue of Home Base:

Home Design Trends: What’s Hot, What’s Not
Changes in Mortgage Interest Deduction Could Spur Home Ownership
Housing Values Take another Dip
Online Sales Tax Would Create Offline Problems for American Homeowners
Protect Your Home while Vacationing

Home Design Trends: What’s Hot, What’s Not

Here’s what home builders say about buyers’ home design preferences.

The priorities of homeowners in terms of what home features are important to them has been changing over the years. At the same time the size of new homes has been declining in recent years. According to the National Association of Home Builders (NAHB), the median floor area of single-family homes completed in 2009 dropped to 2,135 square feet, six percent off the peak reached in 2007, but significantly larger than the median 1,525 square feet recorded in 1973. The average amount spent by homeowners on remodeling projects in recent years has also declined.

The recent recession has had much to do with this retrenchment both directly and indirectly. Many consumers saw their incomes decline during the recession, and many of those that didn’t were probably being more cautious because of the negative economic outlook.

The NAHB Economics and Housing Policy Group conducted a survey of over 3,000 home builders in the Fall of 2010. The survey focused on the likely preferences of the average, new single-family detached home in 2015. Among the findings was an expectation of the growing preference for one-story units. Builders believe that demand from aging baby boomers, who by far prefer single-story homes, is partly responsible for the recent rise in popularity of this type of housing design.

There has been a recent decline in the number of bedrooms in new homes. The peak was 2005 and 2006 when 39 percent of all new single-family homes had four bedrooms or more. Since then, that share has declined for three consecutive years, down to 34 percent in 2009. Since average family sizes have not changed much over the decade and stands near 2 children per couple, the decline is likely attributable to home buyers’ desires to cut back spending in this area.

The share of single-family homes completed with three or more baths peaked at 28 percent in both 2007 and 2008, and then fell to 24 percent in 2009. Data on remodeling projects reveals that bathroom additions or upgrades remain more popular, so it may be that new home buyers are also opting for more nicely optioned bathrooms at the same time as they are cutting back on the total number.

The share of new homes with no garage or carport has recently seen an uptick, rising from 8 percent of all completions in 2005 to 12 percent in 2009. In 1971, 26 percent of new homes had no garage or carport. Meanwhile, the incidence of homes with a 3+ car garage fell to 17 percent in 2009, after peaking at 20 percent in 2005 and leveling at 19 percent for the following three years. The most popular garage facility remains a 2-car garage – present in 62 percent of new homes completed in 2009 and in 63 percent of those completed in the first half of 2010.

The share of new homes with at least one fireplace declined throughout the 2000s, down to 51 percent in 2009 – the lowest since it stood at 49 percent in 1974. In contrast, between 1986 and 2000, 60 percent or more of all new homes completed had at least one fireplace. Among homes completed in the first half of 2010, less than half of them – 49 percent – had at least one fireplace. Fireplaces are expensive features, and their decline too may reflect more the need of many buyers to economize more than a loss of interest.

Porches are the most popular outdoor feature, present in 62 percent of new homes completed in 2009, and significantly more widespread than in 1992, when only 42 percent of new homes had them. In the first half of 2010, 63 percent of new single-family homes completed had porches. Patios were part of more than half of all homes completed in 2006 (51 percent), but that share has declined in recent years, down to 45 percent in 2009. Over the last two decades, decks have become less common in new homes, as homeowners increasingly choose to add this feature after the home purchase. This comports with data on remodeling, which shows that deck additions continue to be very popular. In 2009, 27 percent of new homes had decks, compared to 37 percent in 1992. Among new single-family homes completed in the first half of 2010, only 25 percent included a deck.

The Census Bureau also collects information on the principal type of exterior wall material. In 2009, a third of all new single-family homes completed had vinyl as their principal exterior wall material, followed by brick (23 percent), stucco (19 percent), fiber cement (13 percent), and wood (9 percent). Fiber cement is a composite material made of sand, cement and cellulose. In appearance fiber cement siding most often consists of overlapping horizontal boards, imitating wooden siding, clapboard and imitation shingles.

When builders were asked to rate the probability of five broad trends taking hold between now and 20125, two trends stood out as the most probable to occur: the single-family home will get smaller and it will have more green features. They thought it less likely that there would be growth in the trend for more technology features, more universal features and more outdoor living features. 

More than half of the respondents expected the living room will merge with other spaces in the home, another 30 percent report that the living room will vanish to save on square footage, and 13 percent expect it will become a parlor/retreat/library or music room.

In an average home, the only area that more than half believe likely to increase in their share of a home’s total space over the next five years is the family room (54 percent of respondents think so), whereas the living room, the entry foyer, and the dining room are all expected to lose relevance (76 percent, 66 percent, and 63 percent of respondents, respectively, agree these areas are likely to see their share of total space decrease). Many areas, however, are likely to preserve their current size: other (non-master) baths (81 percent of respondents think will stay the same), basement (63 percent), laundry room (62 percent), closet space (62 percent), other (non-master) bedrooms (59 percent), and the garage (58 percent).

The kitchen’s share of total floor area is expected to increase by 47 percent of respondents, but expected to stay the same by 44 percent. The master bedroom bath is likely to decrease according to 45 percent of respondents, but 38 percent think it will stay the same. The master bedroom is expected to stay about the same by 48 percent of respondents, but 34 percent think it will likely decrease. And last, the mudroom is likely to stay the same according to 47 percent of respondents, yet 37 percent expect it to decrease.

According to survey respondents, the Great Room (kitchen-family room-living room) is the most likely room to be included in the average, new single-family detached home of 2015. Other rooms/features “very likely” to be included (on a 1-5 scale) are: walk-in closet in master bedroom (4.5), laundry room (4.2), ceiling fan (4.1), master bedroom on 1st floor of 2-story home (4.1), and a 2-car garage.

Falling behind those features in a “somewhat likely” category to be included in the average new home of 2015 are 9’ or higher ceilings in the first floor and a home office, an indoor fireplace and bolder colors on interior walls.

Rooms or features least likely to be present in an average new single-family home in 2015 include two master bedroom suites (2.2 average rating), sunroom (2.2), hobbies room (2.2) media room (2.4), living room (2.5), 4-bedrooms or more (2.6), 3-car or more garage (2.6), skylights (2.7), dining room (2.8), unheated (3-season) porch (2.8), mudroom (2.9), and 3-bathrooms or more (2.9). Respondents frequently mentioned that there is a great likelihood that more rooms will become multi-purpose, simultaneously serving multiple functions i.e. guest bedroom/hobby/exercise room.

When asked about the likelihood that a list of seven universal/accessibility features be included in the average new home of 2015, survey respondents gave all of them an average rating between 3.0 and 3.9, making them only “somewhat likely” to be included. With an average rating of 3.8, doorways at least 3 feet wide was the highest rated universal feature, followed by seating in shower (3.6), hallways at least 4 feet wide (3.6), stepless shower (3.4), entrance without steps (3.4), non-slip floor surfaces (3.3), and grab bars in bathroom (3.3) (Exhibit 15). Some respondents wrote-in “other” universal/accessibility features likely to be included, such as blocking walls in preparation for future additions, height adjustments to kitchen and bath elements, and adaptable framing for future accessibility needs.

According to survey respondents, a programmable thermostat is the only “very likely” technology feature to be included in new homes in 2015. Other technology features were considered “somewhat likely” to be present in new homes, including a multi-zone HVAC system, structured wiring system, and energy management system (all of which received an average rating of 3.8), as well as a home security system (3.5), instant hot water in bathrooms and kitchen (3.3), and a lighting control system (3.1). The least likely technology features to be installed in an average new home in 2015 are an elevator (1.8), window covering controls (2.2), central vacuum (2.5), multiline phone system (2.5), sensor-operated faucets (2.7), whole house audio system (2.8), whole house video access (2.9) and whole home control/automation system (2.9).

Among green features, low-E windows are “very likely” to be present in the average new single-family home of 2015, given their average rating of 4.5. Engineered wood beams, joists, or trusses, with an average rating of 4.4, was the second most likely green feature, followed by water efficient features and Energy-Star rating for the whole home (both with an average rating of 4.1).

Among the green features respondents rated as “somewhat likely” to be present in the average new single-family detached home of 2015 are insulation higher than required by code (3.8), tankless water heater (3.8), argon gas windows (3.7), green certification from ANSI National Green Building Standard – NAHB‟s green building standard (3.2), green certification from local/state green building programs (3.2), and solar water heating or electric system (3.1). Unlikely candidates to be part of average new homes in 2015 include other green certifications and other renewable energy sources i.e. geothermal, wind (2.8).

Respondents did not consider any one in particular type of outdoor feature to be “very likely” to be included in average new homes in 2015, which reflects their overall belief that outdoor features will be optional, and not standard in the average home, and also that outdoor features are highly dependent on climate and region of the country. There were a few outdoor features, however, that respondents considered “somewhat likely” to be present in an average new home in 2015, including a front porch (3.8 average rating), a patio (3.7), a deck (3.5), outdoor lighting (3.4), and a rear porch (3.4). Among the “least likely” outdoor features are an outdoor refrigerator (2.0), an outdoor sink (2.1), an outdoor cooking island (2.2), an outdoor fireplace (2.3), as well as a full outdoor kitchen (cooking, refrigerator, and sink) (2.4), and a grill (2.9).

According to survey respondents, the kitchen of the average new home of 2015 is likely to have a double sink (4.3 average rating), recessed lighting (4.2), table space for eating (4.1), a breakfast bar (4.0), and pull-out drawers (4.0) . A central island (3.8) is “somewhat likely” to be included in kitchens of average new homes in 2015, along with a walk-in pantry (3.6), a recycling center (3.6), desk/computer area (3.4 ), granite countertop (3.4), and to a lesser degree laminate countertops (3.0).

What the average new kitchen of 2015 is “unlikely” to have is a trash compactor, fireplace, wine cooler, and butler’s pantry (all with an average rating of 2.3), hot water dispenser (2.6), and a small appliance storage area (2.8).

Two features stand out as “very likely” candidates to be present in the bathroom of an average new home in 2015, namely a double vanity and a linen closet, with a 4.2 and a 4.1 average rating, respectively.

Climate as well as regional preferences have significant weight when choosing outside materials. As a result, no one material was rated as “very likely” to be on the front side of an average new home in 2015. Instead, the majority received a “somewhat likely” rating, among them: fiber cement (with an average rating of 3.8), stone (3.5), brick (3.4), stucco (3.2), and vinyl (3.1) (Exhibit 22). Vinyl and fiber cement are the likelier outside materials in the Northeast, fiber cement and stone are the more likely choices in the Midwest, while brick and fiber cement are likelier in the South, and stucco and fiber cement in the West. Wood, on the other hand, was considered to be an “unlikely” outside material (average rating 2.8), along with aluminum (2.0).

Housing Values Take another Dip

This is one tax increase that nobody supports.

American homeowners are using the tools of technology to solve the many challenges that have come with the economic downturn, but new legislation could soon change that.

Ecommerce has been one of the tools that many consumers have turned to in recent years. Rather than drive to the mall, consumers are ordering more products and services online than ever before.  This not only saves money at the gas pump, but offers consumers greater access to the goods and services they want, frequently at lower prices.

Additionally, more homeowners and other consumers are expanding the use of ecommerce sites as their primary or secondary source of income. According to AC Nielson International Research, 1.5 million people have generated extra cash by having garage sales online. The study also showed that even several years ago about 724,000 Americans said that eBay was already their primary or secondary source of income.  The recent recession has driven both of those numbers up, as workers who have lost their jobs or seen their hours cut are increasingly turning their hobbies into small online businesses.  This important income supplement is saving many homeowners from foreclosure and helping first time buyers save up for a down payment. Both are helping to stabilize housing values.

While consumers, businesses, and state and local governments all benefit from ecommerce, not everyone is supportive of its continued growth. As more consumers buy online, shopping center owners have experienced higher vacancy rates and stagnant rental rates. The oil companies are probably unhappy that consumers are driving to the malls less frequently, as well. Even though home based ecommerce businesses collect sales taxes from consumers on their local sales revenue just like other local retailers, many revenue hungry state and local governments are looking to increase their coffers by burdening out of state small home based ecommerce businesses with new sales tax collection requirements.

Unfortunately this debate has made its way to the halls of Congress. Senator Richard Durbin (D-IL) is planning to introduce a bill, ironically called the “Main Street Fairness Act,” which would increase the amount of state and local sales taxes consumers pay on Internet purchases. It will also create new complexities in the sales tax law that will especially hinder small home based ecommerce businesses. This bill does nothing to create “fairness” in the retail market. If the shopping center owners and large brick and mortar retail chains that support it can increase the cost of online purchases, perhaps they can run the small mom and pop stores off the Internet just as they continue to run them off Main Street.

The Main Street Fairness Act is completely contrary to the sentiments of American voters. A majority of Americans believe that increasing the collection of sales taxes on Internet purchases is bad public policy. A 2008 survey by Parade Magazine, asked readers: “Should Internet Sales Be Taxed?” Based on 3,125 survey responses, 85% opposed taxing ANY Internet sales. By contrast there is far less voter opposition to raising sin taxes on products like alcohol and tobacco, or temporary income tax surcharges on the very wealthy, when tax increases are the only remaining way for state and local governments to balance their budgets. 

Rather than expanding the collection of sales taxes on Internet purchases, Congress should instead ban the collection of state and local Internet sales taxes. Many local governments currently provide temporary sales tax holidays for back-to-school or other purchases, and most state governments don’t charge sales tax on products such as prescription drugs. In addition to the overwhelming popularity of such a measure with voters, a permanent Internet sales tax holiday would also help the economy, create new jobs, and help the environment.

Consumers would be able to buy more online and small home-based online businesses will grow faster if there was a permanent Internet sales tax holiday. They will hire new workers, providing badly needed jobs at a time when unemployment is still hovering at close to 10%. By reducing unemployment we will also help federal, state and local governments by reducing government spending associated with unemployment benefits. Since more ecommerce means less driving to the mall, it will also reduce government costs for the maintenance and expansion of the transportation infrastructure. The environment will benefit from reduced auto pollution as well. Our cars will remain in our driveway, and the products will be delivered by the U.S. postal carriers, UPS and FedEx trucks that go through our neighborhood every day anyway.

The economic challenges the country is facing, coupled with rapidly changing technological advances indicate that more and more of our lives will be spent online. Before enacting policy that will impede our economic recovery, hurt consumers and home based ecommerce companies, and which is opposed by the vast majority of voters, policymakers should look to other alternatives. The Main Street Fairness Act is clearly an idea whose time has not arrived, and it should be opposed by voters and legislators alike.

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Protect Your Home while Vacationing

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