CBIA Economist Predicts Slight Upturn for California’s Housing Market in 2008

New Home Construction Market to Begin Slow Recovery in Mid-2008

Thursday, January 3, 2008

SACRAMENTO – California’s beleaguered new-home market should begin a modest recovery this year, but won’t really rebound until public policy reforms to streamline the building process and promote construction of more-affordable new homes, the California Building Industry Association (CBIA) announced today.

In 2008, CBIA Chief Economist Alan Nevin predicts that the market will demonstrate a slow growth.

“By mid-2008 the housing industry will show signs of growth,” Nevin said during a media conference call today. “Continued population growth, a reduction of existing inventory and a return to normalcy in the credit markets are a recipe for a more positive 2008. As a result, we are projecting a slight increase in new home sales over last year.”

Specifically Nevin predicts that new-home sales will increase in the second half of 2008, leading to the construction of more than 80,000 new single-family homes this year, up from about 70,000 last year. He also expects production of condominiums, apartments and townhomes to increase to about 46,700, compared to about 44,000 in 2007.

While an improvement over 2007, the projected 128,400 total housing starts pales in comparison to production during the early part of the decade, which peaked at 212,960 in 2004 – and especially pales compared to the total housing need of about 240,000 per year to house the state’s growing population.

CBIA Chairman Ray Becker also pointed out that state budget officials acknowledge that a large part of the state’s current budget deficit is due to the slowing housing market.

“California’s fiscal fortunes are directly linked to the health of the real estate sector. As a crucial economic engine, how the housing sector responds will have a tremendous impact on the economy and government’s ability to provide important services,” Becker said. “With the state facing a $14 billion deficit, we look forward to working with Governor Schwarzenegger and legislative leaders in 2008 to provide meaningful reforms that will stimulate the housing market and help ensure the opportunity for homeownership exists for all of California’s working families.”

Becker noted that in 2005, when the housing industry produced about 209,000 housing units, the homebuilding industry directly and indirectly generated nearly $68 billion to the state’s economy and employed nearly 500,000 California workers. In 2007, that number dropped to something in the neighborhood of 115,000 units, and economic output fell along with production.

Becker added that 2008 provides great opportunities for first-time homebuyers and working families and is an excellent time for state and local governments to strengthen California’s economy.

“Today’s housing market provides consumers with tremendous value, but more can be done to ensure working families can attain their dream of homeownership. By acting now, policy-makers have a great opportunity to increase California’s abysmal homeownership rate and strengthen our economy. Making more land available for new homes and controlling fees on homeownership will help stimulate the housing industry and ensure the projected gains in the market are realized and the dream of homeownership and economic prosperity are regained.”

Specifically, CBIA is proposing a number of reforms that would help jump-start the housing market and allow for the production of more-affordable homes:

  • CBIA is proposing legislation that creates incentives for urban-centric housing development, and that allows for streamlined environmental reviews for infill housing development and planned greenfield development.
  • The Association is asking the Legislature to extend expiring subdivision maps, which will allow projects to resume quickly when the market rebounds.
  • CBIA is asking lawmakers to allow the payment of impact fees at certificate of occupancy instead of when the building permits are pulled.
  • Lastly, the Association has launched a task force to take a close look at impact fees and fight back against fees that are capricious and arbitrary and have no real connection to costs new development might cause. 

###

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 $60 billion a year to the California economy and creates an estimated 526,000 jobs statewide. More information is available on the Association's Web site, www.cbia.org.