Housing Production Continues to Increase in June
July 28, 2006
Contact:
John Frith
CBIA Vice President/Public Affairs
(916) 443-7933 ext. 332
(916) 803-3005 (cell)
jfrith@cbia.org
or
Deana Vladic
CBIA Communications Specialist
(916) 443-7933 ext. 346
dvladic@cbia.org
Note to editors: A table listing housing starts by type and by metro area is available on the website.
SACRAMENTO — Housing starts continued to climb in June, suggesting that production is on target to reach expected levels for the year, the California Building Industry Association announced today.
In June, building permits were pulled for 12,292 single-family homes statewide, up 2.9 percent from the previous month. It’s the fifth straight month-over-month gain in single-family production, according to statistics compiled by the Burbank-based Construction Industry Research Board.
Multifamily housing starts — condos and apartments — totaled 6,883, up 97.6 percent from the previous month, however multifamily starts tend to be more volatile than single-family starts on a monthly basis. Overall for the month, builders pulled permits for 19,175 homes and apartments, up 24.3 percent from the previous month.
In his midyear housing forecast issued at PCBC® The Premier Building Show last month, CBIA Chief Economist Alan Nevin said that for the remainder of 2006, new-home construction in California is expected to continue cooling off from 2005’s strong production levels as the housing market adjusts from a superheated state to more normal conditions.
“Although starts for the year are down 12 percent compared to the first six months of 2005, California builders are on target to begin construction on between 170,000 and 180,000 units for 2006,” Nevin said. “Statewide, the single-family permit count is down almost 20 percent, but that is counterbalanced by an 11 percent increase in multifamily permits.”
Nevin predicts that multifamily construction will remain extremely strong in most markets and expects starts to total between 45,000 and 55,000 units — about the same as last year’s levels — but single-family starts are expected to drop to between 125,000 and 135,000, compared to nearly 155,000 in 2005.
“Several metropolitan areas had a major increase in multifamily permits, predominantly related to vertical condominium construction in their urban cores.” Nevin said. “The principal areas with gains are Los Angeles, the Bay Area and Orange County.”
Nevin attributes the slowdown to a substantial unsold inventory of homes — both under construction and completed. He says that the depletion of that single-family inventory is under way as builders are offering concessions throughout the state.
Layne Marceau, 2006 CBIA Chairman and a Bay Area homebuilder, says that housing seems to be returning to a “normal” market, where buyers have choice and sellers have to price their properties right in order to sell them. He also noted that because of the amount of homes on the market, now is a great time to buy.
“The market is much different than it was a year ago,” Marceau said. “Last year, we had waiting lists for homes before we even broke ground, but this year it’s a different story. Inventory is moving a little slower, but that makes it a great time for buyers, as builders are getting creative and offering incentives to attract them.”
Despite the softer market, new-home prices remain near their all-time high, Marceau said, adding that the affordability level of homes in California is still at an all-time low, which makes it extremely difficult for first-time buyers to get their piece of the American Dream.
“It’s getting harder and harder for the first-time homebuyer to get their foot in the door,” Marceau said. “Because of the red tape, high fees and unnecessary regulations imposed on the industry, it’s simply not possible to build entry-level homes in most parts of California. When ‘developer fees’ sometimes total $100,000 per house and the land to build on costs $150,000, our industry simply cannot build the entry-level product that is so sorely lacking. Those added costs can literally be the difference between a family being able to afford a home or having to continue renting.”
Marceau said state and local governments need to work with the industry to promote expanded production, especially production of entry-level condos and other homes that first-time homebuyers can afford.
###
The California Building Industry Association is a statewide trade association representing some 6,700 businesses — homebuilders, remodelers, subcontractors, architects, engineers, designers and other industry professionals. A recent study determined that homebuilding generates approximately $68 billion a year to the California economy and creates an estimated 487,000 jobs statewide. More information is available on the Association's Web site, www.cbia.org
The Construction Industry Research Board (CIRB) is a nonprofit research center established in 1974 to provide statistical information on the California building and construction industry. More information is available on the CIRB Web site, www.cirbdata.com.