Predictions

A measure of any great magazine is its willingness to present a vision of the future through the eyes of its industry and its editorial staff. For 25 years, we've reported and made predictions regarding every facet of the housing industry— so much to be right or first with a forecast or trend, but to help push (or pull) builders toward the next horizon. It's a risk we understand and respect ... and will continue to take. Besides, it's fun to make predictions ... and even more fun to find out how close we came to reality. It keeps us (and you) interested, creates debate and dialogue, and provokes thought, investigation, and action.

The following 25 predictions, culled from past issues of BUILDER, provide an opportunity to evaluate our visionary skills, take a look back with 20/20 hindsight, and see just how far the housing industry has come in the last quarter century.

[prediction] "Neo-traditionalism is a megatrend. The edge will go to builders who understand that home has become a mother ship, a high-tech haven."— Elkind, TrendSights, in the feature "Cocoons" (July 1989)

[outcome] Coined by trend watcher Faith Popcorn, "cocooning" became a buzzword for housing in the early '90s that still has legs today, as does neo-traditionalism (it just doesn't roll off the tongue as easily). The "mother ship, high-tech haven" we foresaw was epitomized in our 2003 idea home ("Destinations"), called HomeDestinations at Southern Highlands, a 13,000-square-foot, indoor/outdoor villa in Las Vegas featuring an Old World feel and finishes. Its cocooning features included a home theater (with full bar), in-home spa and massage room, putting green, "panic" room, sports court garage, wine cellar, game room, personal dry cleaning equipment, and dual home offices. They can all be found in mainstream move-up housing today, though typically not all in one house.

[prediction] "At the rate of 100,000 [units] a year, it will take us 90 years to meet the needs of our currently under-served population."— Chisholm, director, Office of Policy for Public and Indian Housing at HUD, regarding Section 8 housing (February 1985)

[outcome] Currently, HUD's 30-year-old housing assistance program serves 1.5 million families, with more than 5 million still in need and waiting lists that average 28 months in most cities and up to eight years in New York and Washington.

[prediction] "As a result [of the Fed's decision to raise interest rates to record levels], the housing industry faces a crisis. New-home sales will drop sharply. Inventory will build up. The resale market ... will continue to weaken." — Sumichrast, chief economist, NAHB (December 1979)

[outcome] Old-timers still get woozy and feverish when they think about the recession of the early '80s, when starts dipped to a record-low 1.062 million (and only 662,000 single-family), while 30-year fixed-mortgage interest rates peaked at 16.63 percent.

[prediction] "[Home offices and home theaters] are the rooms of the '90s, and they'll be completely mainstream by 2000."— Bradford, then-senior editor (January 1996)

[outcome] When was the last time anyone built a move-up house without at least merchandising a home office? Stand-alone home theaters (or media rooms) are still a luxury, but many family rooms today effectively double as entertainment centers. In the future, as communication and entertainment functions blur, they may require only one room anyway.

Photo: Jonathan Barkat

[prediction] "Watch the stock market. A 'snap-back' [of stock valuation] in the market could easily cause both consumers and business to pull away from the table."— Seiders, chief economist, NAHB (December 1999)

[outcome] Builders and most analysts are kicking themselves for not saluting this red flag, though admittedly it seemed unlikely at the time that stocks would tumble so far, so fast, in just two years. And while housing stocks performed decently during the latest economic slowdown— to the relative preparedness of the industry and low mortgage rates to help sustain it— still sell at steep discounts to the S&P 500 due to the perceived cyclicality of the industry.

[prediction] "I see the disappearance of almost all of our traditional sources of [AD&C] funds [and] a serious social problem if we cannot house Americans. If the [affordable housing] problem is not addressed ... I envision housing riots."— A. Arbib, Pinebrook Building Co., Pembroke Pines, Fla. (January 1982)

[outcome] We don't recall any riots, but affordable housing is still a crisis that has yet to be dealt with on a national level. One of the NAHB's big political objectives this year is to foster the development of a secondary market for AD&C loans.

[prediction] "There will be no secondary market for ARMs and less single-family lending ... . Thrifts and banks will be replaced as sources of capital by financial services institutions."— Gordon, managing director, Mortgage Finance Group, Home Federal (August 1989)

[outcome] Of course, ARMs developed into a strong secondary market category, albeit softer when fixed rates are low. M&A activity in the banking industry during the '90s blurred the lines between lending sources; many banks and thrifts now own brokerage firms (or vice versa). But a builder's main lending sources remain locally based.

[prediction] "'Ego-nomics' shifts the emphasis from the manufacturer's priorities to the consumers'. Ego-nomics is niche marketing to the extreme." — Popcorn, trend analyst, regarding housing customization (July 1992)

Photo: James F. Wilson

[prediction] "... It's going to take about five years before we see a boom in the home automation market like we did with the VCR craze."— Ray, director of market development, Mitsubishi Electric Development and Marketing America (May 1987)

[outcome] We're still waiting.

[prediction] "If all goes as planned, the homes you build today will be obsolete in 10 years. ... Smart House [NAHB's investment in home automation] seems poised to alter not only the performance of the house, but also the performance of housing."— Binsacca, then-senior editor (July 1989)

[outcome] All didn't go as planned, of course. After several fits and starts (and tens of millions of dollars invested by a consortium of builders and suppliers) Smart House became a private network of home automation installation and service centers in the mid-'90s. And while the homes you built in 1989 may not be obsolete, could they compete technologically with those you build today, or even four years ago?

[prediction] "Remodeling is the sleeping giant of the housing industry."— Fletcher, then-senior editor, "Builder's Best: Remodeling" (December 1989)

[outcome] Between 1989 and 2001, annual residential remodeling expenditures grew from $108 million to $157.8 million, a 46 percent increase, providing a significant hedge against new-home activity.

[prediction] "A ... plan to add 11.6 million acres ... of northwest forests set aside for spotted owls will ...spark 'volatile lumber prices.'"— German, then-senior editor, quoting Alberto Goetzl, economist, American Forest Resource Alliance (July 1991) [outcome] Lumber prices went from an annual average of $287 per thousand board feet in 1992 to an all-time peak of $499 in December 1993 and an annual average of $411 for 1994. While the composite price for framing lumber has spiked (and sunk) since, it currently rests at close to 1992 levels.

[prediction] "New technologies hitting the marketplace today suggest that virtual reality new-home tours ... are soon to be fact. Computer-based technologies are giving builders unprecedented power to not only customize a buyer's home, but to customize the sales presentation ... . 'Computers are having a big impact on sales that's only going to get bigger.'"— Garfall, sales center designer, "Selling in Cyberspace" (July 1994)

[outcome] Is there a builder still in business without a Web site, or not leveraging computer design software to manipulate plans for buyers? Actually, we foreshadowed this prediction a bit in August 1993 with a short mention of a national MLS component added to an upstart Internet venture called America Online. It soon became clear that the Web was the future, especially in new-home marketing and sales. While the dot-bomb had a ripple effect on e-commerce initiatives for housing and the supply chain, builders have been savvy about capitalizing on the Internet's sales, marketing, and information gathering benefits, as well as its promise for back-office integration.

[prediction] "The situation has gone from bad to worse as Congress flounders in the swamp of tax reform. It is becoming increasingly clear that the vision of a radically revised tax code ... is a flawed concept. It should be abandoned before it wrecks the economy."— G. Jacobs, editor, Housing & Development Reporter (December 1985).

[outcome] Whether it wrecked the economy is debatable, but the 1986 Tax Reform Act sure sank the multifamily sector. Two years removed from a peak of 669,000 starts and only a year after tax reform removed credits for multifamily construction, the apartment and condo market dropped to 407,000 units by 1987. By 1990, multifamily starts were a paltry 298,000 and provided a meager cushion against the next recession.

[prediction] "The information revolution has finally arrived. And every business, including ours, has begun to change." — B. Rouda, then-editor (July 1994)

[outcome] The term "Internet" didn't even appear in mainstream media until a Forbes article in 1991, and even three years later it was an obscure term. Since then, however, its impact on housing is undeniably significant, creating a sea change of communications, marketing, sales, and service capabilities. Rouda now heads up ebuild, an online building products and information resource by BUILDER's publisher, Hanley-Wood, LLC.

[prediction] "There will be complete integration between the office and the jobsite [by 1999]." — Brown, then-builder and future founder of now-defunct BuildNet (July 1994)

[outcome] He may have miscalculated the building industry's interest and investment in supply-chain e-commerce, but Brown's prediction about mobile computing and remote data synchronization was prophetic, if slightly premature.

[prediction] "Welcome to The Home of the Future ... where people don't adapt their lifestyle to a home; the home adapts to them ... where people can work from their home every bit as conveniently as they can from the office ... where new-home design anticipates changes in family living arrangements through a generation."— Thompson, editor in chief, "The Home of the Future" (December 1997)

[outcome] After talking about fringe and futuristic features for years, we finally built them into a 4,573-square-foot home in Dallas to showcase a new and innovative reality with regards to design, products, and systems. A harbinger to The Home of the Future actually came nearly a decade earlier, when David MacFadyen, then-president of the NAHB Research Center, predicted that homes would soon "support [a buyer's] needs for fitness, health, and education, [and] play a much more active role in shaping people's lifestyles and entertainment." Many of the products, systems, and design features we showcased in The Home of the Future— structured wiring and cable, multipurpose gathering spaces, exterior finish combinations, and both adult and kid retreats— edged into the mainstream.

[prediction] "If we [builders] lose on wetlands [the 1992 Wetlands Reform Bill], we'll lose on endangered species and a whole range of environmental issues."— NAHB official (February 1992)

[outcome] Wetlands reform never got to the floor of Congress. Today, environmental reform battles are conducted primarily in the courts and regulatory agencies, where builders have fared fairly well.

[prediction] "Riding the baby boom through its various life-cycle changes is the clear prescription for success."— Sternlieb, housing industry analyst and demographer (January 1987)

[outcome] Obviously baby boomers were a tidal wave of opportunity, but they didn't act en masse. Thus we have the era of "mass customization," among other accommodations, to serve their whims.

[prediction] "There is a move toward concentration and consolidation [in the building industry]. Big builders are growing bigger and increasing their market share. Barbara Alexander, a housing analyst with Smith, Barney, Harris Upham & Co., predicted recently that the 400 or so largest builders would boost their market share from one-third to more than one-half by 1990."— Lemov, then-business editor, inaugural "Builder 100" feature (May 1984)

[outcome] By 1990, market share among the top 400 builders was roughly 25 percent. By 2002, it had approached one-third of all new-home closings. Share among the top 100 companies, meanwhile, grew even faster: from 14.5 percent in 1990 to 28 percent in 2002. Even more telling is that the top-10 builders now account for more than half of all BUILDER 100 new-home closings— signs of the industry consolidation predicted nearly 20 years ago. By 1998, with consolidation among the largest builders reaching a fever pitch, Ernst and Young's Steve Friedman predicted that we would someday see "... four to six incredibly huge companies, a middle tier of probably six large companies, and a whole lot of small guys ... . It's not unreasonable to foresee a handful of very large builders with a significant presence in the top 40 or 50 markets." That's exactly what's happened as Pulte, Centex, Lennar, KB Home, and D.R. Horton have pulled away from the pack, hovering around 25,000 each in annual closings.

[prediction] "Three years from now, 90 percent of all new homes will be wired this way."— Goldberg, New Jersey builder, regarding advanced (or structured) wiring systems (September 1998)

[outcome] Not quite, but getting there. By the most recent estimates, 42 percent of new homes (about 670,000 units) are roughed with structured wiring systems, up from about 3 percent in 1998. With that, 78 percent of builders offer it as either a standard or an optional feature.

[prediction] "It may only be a matter time before housing's sacred cow is milked ... ."— German, then-senior editor, regarding threats in Congress to the deduction on mortgage interest (August 1989)

[outcome] Despite scare tactics and "what-if" scenarios, the mortgage interest deduction remains on Schedule A. Following the 2000 election cycle, says an NAHB report, reducing, tampering with, or (gasp!) eliminating the deduction, "... was not on the drawing boards of either party."

[prediction] "[Ralph Johnson, head of the NAHB's Research Foundation] estimates that as many as 500,000 passive solar houses a year will be built by 1986. Already it's getting difficult to sell a house without adequate energy-saving features; by then it might be impossible."— Anton, editor (now president of Hanley-Wood, LLC, publisher of BUILDER) (May 1981)

[outcome] It's true that passive solar and most other energy-saving techniques didn't measure up to Johnson's lofty predictions by the mid-'80s— even today. (Though photovoltaics did find a viable place in remote locations.) Even if solar has not "taken over the world," as many predicted following the first energy crisis, try selling a new home today (or even in the last decade) without high-performance windows, housewrap, wall and ceiling insulation, and high-efficiency HVAC equipment and appliances. In some Southwestern markets, competition requires a third-party energy rating.

[prediction] "It's the future. More builders will find themselves footing the entire bill for infrastructure."— Pagano, political science professor, Miami University (August 1993)

[outcome] Without a doubt, the vast majority of builders no longer rely upon (or even lobby for) public funds for residential infrastructure. Some find themselves on the hook to pay for upgrading existing systems to handle new impacts, as well as open space, community amenities, and other features beyond the curb and gutter. That said, regulatory and other development fees are often passed along from developer to builder to homeowner; the public may not pay for streets in their tax bills, but they do in the escalating prices of new homes.

[prediction] "But what's going to happen is that eventually as the energy crunch hits, and there's difficulty with [storm] survivability and more talk about saving trees, I believe people will gradually turn to domes."— Crandall, dome home builder (November 2001)

[outcome] Lump this prediction in with ones about straw bale, rammed earth, and old tires. On the other hand, structural insulated panels and insulated concrete foundations, which looked equally far-fetched even 10 years ago, have achieved mainstream success, partly because building with them results in a traditional-looking home.

Rich Binsacca is a contributing editor to BUILDER. Steve Zurier, senior technology editor, provided additional research for this article.