Housing Starts Drop in July, CBIA Reports
Homebuilders Predict Market to Stabilize by End of Year, Cite Critical Need for Lower-Cost Homes and Condos
August 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 CBIA Web site.
SACRAMENTO — Although overall housing starts fell nearly 43 percent since June, residential construction is still on target for production of 180,000 units in 2006, the California Building Industry Association announced today.
In July, permits were pulled for 8,112 single-family homes statewide, down 35.1 percent from the previous month while multifamily housing starts — condos and apartments — totaled 3,009, down 56.9 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 11,121 homes, condos and apartments, according to statistics compiled by the Burbank-based Construction Industry Research Board.
CBIA Chief Economist Alan Nevin said that new-home construction in California is expected to continue cooling off for the remainder of 2006 as the housing market adjusts from a superheated state to more normal conditions.
"July 2006 permits for residential construction are on target for production of 180,000 units in 2006. Following the trends of the first six months of the year, multifamily permits are ahead of last year with single-family permits lagging behind.” Nevin said.
Nevin noted that builders will continue to reduce their standing inventory of unsold homes that are under construction or completed, and are now using aggressive marketing techniques to reduce their inventory.
“At the present rate, we anticipate that the inventory will be nearly depleted by the end of the third quarter.” Nevin said. “From that point on, builders will only build what they can pre-sell.”
Nevin predicts that multifamily construction will remain 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.
“Multi-family permits are a category dominated by condominiums. In urban areas like San Francisco, Oakland and Orange County, condominium construction is moving forward on schedule, particularly mid and high-rise buildings." he said.
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. But he added that the supply of homes for first-time buyers remains all but nonexistent, noting that a report issued just last week revealed that 20 of the 21 least-affordable metropolitan areas in the nation are located in California.
“Prices of entry-level homes today are simply not affordable. Red tape and unnecessary regulations have hampered the industry’s ability to provide the amount of new homes and the mix of housing we need to meet the state's long-term housing, adding tens of thousands of dollars to a home before we can even break ground. Buyers can only stretch so much.”
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.
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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.