California New Home Market Ends 2007 in Doldrums, CBIA Announces
February 15, 2008
SACRAMENTO – The pace of home sales at California new-home communities dropped more than 30 percent in 2007 compared to 2006, but the bottom of the housing downturn may be near, the California Building Industry Association reported today.
The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that net new home sales during 2007 in the subdivisions tracked by Costa Mesa-based HWMI totaled 61,861 homes and condominiums, compared to 89,773 in 2006, a decline of 31.1 percent. Sales of single family homes dropped by 29.7 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 21.6 percent and sales of condominiums were down 38.6 percent. The figures for December were even more dour, with year-over-year declines just shy of 67 percent.
Meanwhile, the median base sales price in these subdivisions dropped 4 percent in 2007 compared to 2006, a figure which would likely be larger if not for a change in the mix of units sold. The 4 percent drop also does not include any of the builder incentives which are commonly used to encourage sales activity.
Jonathan Dienhart, Director of Published Research for HWMI, suggests we may be nearing the bottom of this downturn.
“The 30 percent decline in sales for 2007 is likely the largest annual decrease we will see during this downturn,” Dienhart said. “With housing assistance legislation being passed by the federal government which includes temporary increases in conforming loan limits, along with aggressive rate cuts by the Federal Reserve, hopefully any further declines in 2008 will be minimized with consumers gaining better access to credit and homes becoming more affordable due to lower prices and mortgage rates.”
Robert Rivinius, CBIA’s President and CEO, said the federal stimulus package signed by President Bush earlier this week will make a significant difference for California homebuyers, but said it was crucial for the Congress and state lawmakers to pass additional reforms to further boost the homebuilding industry.
“Raising the conforming loan limits will undoubtedly help restore consumer confidence, help consumers with adjustable rate loans refinance, and ease the credit crunch that has plagued the housing market for the past year,” Rivinius said.
“But at the same time, more needs to be done. Congress should make the conforming loan increases permanent, and consider further stimulus ideas, such as the tax credit for new-home buyers that helped jumpstart the recovery from a housing slowdown in the 1970s.
“And state lawmakers can and must enact reforms to help here in California, such as giving builders longer to begin construction of approved projects in the light of today’s economy. The quicker the homebuilding industry recovers from this slowdown, the quicker state and local budget crises will begin to ease.”
Dienhart notes that we’ll get a better indication in coming months of whether the market has reached the bottom.
“When March rolls around we should get a better idea as to whether the market is hitting bottom or stabilizing at all. Spring time is when the pace of home sales is the fastest, so it provides us a larger data set to analyze. We’ll be watching the numbers very closely to see how activity measures up against prior years.”
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The California Building Industry Association is a statewide trade association representing more than 7,000 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.
Hanley Wood Market Intelligence is the housing industry’s leading provider of rich data and consulting services on residential real estate development and new-home construction and is a division of Hanley Wood, LLC, the premier media company serving housing and construction. More information is available on the company’s Web site, www.hanleywood.com/hwmi or by calling 1-800-639-3777.
Hanley Wood Market Intelligence (HWMI) collects data from new for-sale production subdivisions of 10 units or more on a monthly basis. HWMI Net Sales represent sales contracts signed during the period indicated minus any reported cancellations. Median and Average Prices are based upon the minimum asking price of the plans sold during the period and do not include the cost of any lot/view premiums or upgrades. Because this data is collected monthly and based upon sales contracts that represent future closings, HWMI data is the most forward-looking data source available for new home information in the state of California.