I set out to try and understand exactly what is happening with the housing market so I might have a clearer vision of what I, as a designer, could do about it. I'm still not sure I understand it, but here's what I have so far.Apparently, there was an actual recession. Funny thing about recessions is they aren't declared until after they happen. After September 11, the stock market crashed and America began nesting. Real estate, particularly residential, appeared to be the only stable investment in the world. So people invested heavily, as heavily as they could. This drove prices up and interest rates on mortgages down. Before we knew it, property values increased at record rates, outpacing the growth of rental rates for first time in American history. This created a gigantic market of renters wanting to become buyers. Presto! Overvalued condos everywhere!
At the same time, the wary homeowner, who was being told they now had thousands of dollars in equity and they needed to refinance fast before rates went back up. Many did, but by 2006, those inflated home values started to correct and people ended up owing more on their home that it was worth. At the same time, people stopped buying. New condo buildings were left vacant and rent was back to being the better option for many. Mortgage rates went back up and those with adjustable rate mortgages ended up owing more on their home than it was worth, leaving them unable to make their mortgage payments, unable to refinance, and unable to sell.
The fallout has been exponential and in every market from affordable to luxury. So what is design's role in all this? I don't yet have an answer for that either, but I do know that design is proactive, not reactive. And design is also and investment, not an expense. To be more accurate, design is investment planning. It's something that can be used to leverage an investment. So I would say that residential designers, and homeowners, need to look at the last 30 years, not the last 3, and design to those standards.
If we learn from the recent past, we can at least see our design mistakes. We probably should have done long term market analysis as part of pre-design on any large scale housing project. We should have designed to a budget that fit the long term growth rate of a home rather than max out its current appraised value. The bottom line is, design could have had a major impact in avoiding the current fallout. This is why I think this conversation is so important to be having right now. As designers we can make our clients aware of the economic impacts of their decisions. As clients, we can learn how to use design as our ally in securing our own economic sustainability.
