California New-Home Market Still Searching for Bottom, CBIA Announces
Association Again Calls for Quick Action in Sacramento and Washington, DC
June 19, 2008
SACRAMENTO – The pace of home sales at California new-home communities continued to remain slow in April, but year-over-year sales declines shrunk slightly for another consecutive month, the California Building Industry Association reported today.
The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that new-home sales in April were 44 percent below April 2007. While a significant decline, the drop is an improvement from the year-over-year decline of nearly 49 percent in March.
Jonathan Dienhart, Director of Published Research for HWMI, notes the trend in year-over-year sales percentages is positive, but is very gradual.
“The fact that year-over-year declines are shrinking is a good sign,” Dienhart said. “But unfortunately it is occurring very gradually, meaning it’s going to be a slow process for the market to finally hit bottom and start to turn around.”
During April, 3,246 homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 5,785 in April 2007. Sales of single-family homes dropped by 42 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 41 percent and sales of condominiums were down 54 percent.
One exception was the Sacramento region, which experienced a significant year-over-year increase. But Dienhart said that increase is due to the way data is calculated. He said a sizeable multifamily development was cancelled in April 2007, which made net sales activity in that month artificially low. With cancelled projects excluded from the calculation, the market area saw a 25 percent decline from a year earlier.
Dienhart also noted that non-seasonally adjusted total new home sales in April were 9 percent lower than levels seen in March, which he said is not unusual as March tends to be one of the strongest months of the year for new-home sales. Median base sales prices statewide were 4.3 percent lower than in March.
Dienhart also suggests that price declines are likely to continue.
“With lots of new home inventory on the market, and lots of foreclosure activity still occurring in the resale market, there will be consistent downward pressure on prices, especially with the California economy facing broader economic difficulties.”
Robert Rivinius, CBIA’s President and CEO, said the continued weak sales numbers – which are causing builders to reduce construction – demonstrate the need for policy makers in Sacramento and the nation’s capital to take quick action to jump-start the housing market.
“Two bills now moving through the Legislature would give builders breathing room in this depressed market,” Rivinius said. “The first, SB 1185 by Long Beach Senator Alan Lowenthal, would give builders up to two extra years to complete approved projects, while the second, AB 2604 by Bay Area Assembly Member Alberto Torrico, encourages local governments to defer most impact fees until a home actually sells.
“Meanwhile, Congress is currently debating important legislation that would make permanent higher limits for federally backed home loans and to enact a temporary tax credit for first-time homebuyers.
“Together, these measures would help restore consumer confidence, help clear the existing inventory of foreclosed homes, and allow builders to be able to quickly respond to a market turn-around, putting people back to work and increasing needed tax revenue for cities and the state.”
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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. 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.