After slipping slightly in October, single-family housing starts rose again in November by 6.9 percent to a seasonally adjusted annual rate of 465,000. However, this is nearly 8 percent below the November 2009 rate. Completions and permits for new single-family projects also are significantly below the rate of November 2009, although permits increased 3 percent this November. The multifamily sector (five or more units) is experiencing even worse conditions, with completions 73 percent lower in November 2010 than the previous year.

Residential architects report high demand for infill and multifamily projects but continued weakness in the custom home and vacation home markets, although they indicate about a 5 percent improvement in demand for both in 2010. However, from 2008 to 2009, sales of existing and new vacation homes increased 7.9 percent, according to the National Association of Realtors’ (NAR) 2010 Investment and Vacation Home Buyers Survey. So while design services for vacation residences may be low, the market itself is relatively healthy. NAR expects demand for second homes to remain strong, supported by the 85 million Americans in their 30s and 40s—the prime years for buying second homes.

Remodeling services are in high demand, according to the American Institute of Architects (AIA) Home Design Trends Survey for the third quarter. Architects noted significantly improved demand for kitchen and bath remodeling, as well as additions and alterations, since 2009.

Home improvement spending has dropped by 20 percent to 25 percent since the recession began, but remodeling is predicted to grow at a healthy double-digit pace through the first half of 2011, registering a 12.8-percent increase by the end of the second quarter, according to the most recent Leading Indicator of Remodeling Activity released by Harvard University’s Joint Center for Housing Studies’ (JCHS) Remodeling Futures Program. JCHS economists expect this loosening of purse strings for both necessary and discretionary home improvements as a result of stabilizing housing prices and the—albeit slow—economic recovery. Remodeling’s recovery likely will be fueled by needed improvements to the many homes sold through foreclosure.

According to the 2010 State of the Nation’s Housing report released by the JCHS, housing’s recovery—indeed, overall economic health—depends on employment. With unemployment reaching 9.8 percent in November 2010 and with nearly half of the 15.1 million currently unemployed Americans remaining jobless for 27 weeks or longer, it’s no wonder housing demand is low. However, JCHS economists expect employment to improve—slowly—and the NAR projects a 28.9 percent increase in new single-family home sales in 2011 compared with 2009.

Despite the down economy’s influence on their income and financial portfolios, the rich are still comparatively rich. But many affluent Americans have retrenched substantially and are not spending as freely as they did during the boom years. Nevertheless, an attitude of cautious optimism is sparking new life into affluent consumers’ spending.

The 2010 Merrill Lynch Affluent Insights Quarterly survey, released in November, found that 41 percent of affluent consumers surveyed feel more confident in their financial situations than they did in 2009, and 78 percent believe their personal financial situations will improve in the coming year. Their overall outlook is somewhat sunnier, as well, with 26 percent of affluents saying they believe the economy will improve in 2011. However, another 25 percent were not so optimistic, the survey found.

But affluents still spent 33 percent more on luxury goods in 2010 than in 2009, according to the quarterly Luxury Consumption Index released in October by marketing research firm Unity Marketing. And 49 percent of those surveyed reported no plans to either increase or decrease their spending in the next 12 months, although 24 percent of respondents do plan to spend less.

Despite a willingness to spend on home remodeling and other improvement projects in 2009 and 2010—and to spend up to 40 percent more than they did in 2008—an earlier Unity study found that affluents are increasingly hunting for bargains. They still want high-quality products, notes Unity’s president Pam Danziger, but they also want to get the best value possible. As a result, many affluent consumers are trading down to “better” brands rather than purchasing best-of-class brands. This approach will help them maintain their budgets and their style of living as they remain reserved in their spending overall.

Practicality and function seem to trump all else as American homeowners at nearly all price points are scaling back their expectations and budgets. Smaller homes with more flexible spaces and fewer extravagant features are becoming the norm. Interest in specialty rooms such as theater, hobby, or game rooms and home gyms has dropped dramatically since 2009, according to recent American Institute of Architects (AIA) Home Design Trends surveys.

Homeowners increasingly are seeking to make up for smaller footprints and volumes and to accommodate occupants of all physical abilities with open living spaces and other accessible features, indicate residential architects.

Concerns over energy costs and environmental impact began to shrink home sizes even before the recession, and reductions in square footage have accelerated as the sluggish economy has dragged on, report both AIA architects and NAHB economists. The NAHB predicts this trend will continue beyond the recession, but some residential architects think it won’t outlive the recovery. In an informal poll on about the long-term viability of the smaller, greener house trend, more than half of respondents (60.7 percent) predicted that a desire for smaller, more efficient homes will prevail in certain market segments, but that others will revert to pre-recession design preferences.

Multigenerational households are on the rise because of economic, social, and demographic factors. Baby boomers will continue to maintain a strong influence over housing and will revolutionize senior housing, but over the next 10 years and beyond, younger generations will impact the industry in new ways, from growth to design trends.