New Residential Construction Still Slow in May, CBIA Announces
Month Did Show Highest Production Level So Far This Year, However
June 23, 2008
SACRAMENTO — California new-home production in May continued to lag behind last year’s production levels as homebuilders continued to grapple with low demand due to the glut of foreclosures flooding the market, the California Building Industry Association reported today.
According to housing permit data supplied by the Construction Industry Research Board, total housing starts in California, as measured by building permits issued, fell 37 percent in May when compared to the same month a year ago to 7,035 units, the highest monthly total of the year thus far. Single-family home production dropped 52 percent while construction of multifamily units dipped 5 percent when compared to May of 2007.
In May, permits were pulled for 3,531 single-family homes statewide, down 52 percent from May 2007 but up 4 percent from April to the highest level so far this year. Multifamily housing starts — condos and apartments — totaled 3,504, down 5 percent from May 2007 but up 23 percent from the previous month.
During the first four months of the year, single-family home production was down 58 percent from the same period last year with 15,254 units permitted, while multifamily home production fell 24 percent with 14,419 permits pulled. Total new-home production was off 46 percent.
While year-over-year declines continue to shrink and month-to-month comparisons show modest increases, CIRB is still forecasting 79,000 total new units for the year, the lowest annual total since accurate counts of statewide totals began in 1954.
CBIA Chief Economist Alan Nevin noted the most severe decline has been in single-family units permitted.
“During the first five months of the year, single-family units declined from 36,033 in 2007 to 15,254 in 2008,” he said. “By way of comparison, in the first five months of 2005, single-family units totaled 65,042. That’s a decline of almost 80 percent.”
Nevin attributes the smaller decline in multifamily units to the increased demand for apartment construction.
“As noted in earlier monthly reports, the decline in condominium construction has been largely offset by the development of apartments on land formerly intended for condominium development,” Nevin said.
Nevin also noted that the prospect of a major recovery by the end of the year is looking less and less likely as demand for new construction continues to wane in the face of the ongoing foreclosure crisis.
“We see little change in the status of the new residential construction market for the balance of 2008 as homebuilders opt to wait out a return of demand,” he said.
CBIA President and CEO Robert Rivinius pointed to the need for reforms at the state and federal level to jump-start the vital housing industry.
“As more and more signs keep pointing to a recovery further down the road, it’s now more necessary than ever to enact legislation that will help facilitate a quicker recovery for the housing market,” he said.
Rivinius urged state lawmakers to pass CBIA-sponsored legislation that would extend current subdivision maps for two years, allowing builders to keep approved projects in the works that would otherwise expire, and to defer most impact fees until a home actually sells.
“With production off by almost two-thirds here in California, it’s evident that we need to revitalize the new-home market, especially when the effects of the housing downturn continue to ripple throughout the economy,” Rivinius said.
He also called on Congress to make permanent higher conforming loan limits and to enact a temporary tax credit for first-time homebuyers.
“These measures would go a long way in helping to restore consumer confidence while helping to unload the existing inventory of foreclosed homes,” he said. “They might not be the ‘magic bullet’ to cure the ailing housing market, but they would certainly help in revitalizing the economy, allowing builders to quickly respond to a market turn around, and generating much-needed jobs and 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.
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.