Housing Production Continued to Tick Upwards in May, CBIA Announces
Overall Production Is on Track to Be the Fourth-Highest in 17 years
June 30, 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 — Housing starts continued to inch upwards in May compared to earlier this year, suggesting that production is firming up and that 2006 remains on track to see the fourth-highest number of housing starts in the past 17 years, the California Building Industry Association announced today.
In May, permits were pulled for 11,576 single-family homes statewide, up 2.6 percent from the previous month. Since reaching a low of 9,172 permits in January, single-family permits have increased each month this year, according to statistics compiled by the Burbank-based Construction Industry Research Board.
Multifamily housing starts — condos and apartments — totaled 3,687, up 7.4 percent from the previous month. Multifamily starts tend to be more volatile than single-family starts on a monthly basis, but for the year they are up 6.4 percent from the same period in 2005.
Overall for the month, builders pulled permits for 15,263 homes and apartments, an increase of 3.7 percent compared to April. While production for the month was well below May 2005’s level, CBIA Chief Economist Alan Nevin said the numbers reflect the fact that the housing market is adjusting from a superheated state to more normal conditions. He expects overall housing starts in California this year to total between 170,000 and 180,000, down 15- to 20 percent from 2005 but well above production levels throughout the 1990s.
In his midyear housing forecast released last week at PCBC® The Premier Building Show, Nevin said he expects multifamily construction to remain extremely strong in most markets and is expects starts to total between 45,000 and 55,000 units — about the same as last year’s levels — but expects single-family starts to drop to between 125,000 and 135,000, compared to nearly 155,000 in 2005.
“In the Bay Area, Orange County and in the Los Angeles Basin, we see continuing strength in multifamily construction, most of it higher-density condominiums in the urban core,” Nevin said. “Most other markets are holding steady in multifamily units, with the exception of San Diego County, where development has declined markedly, predominantly because of a near-total cutback in downtown high-rise development.”
As for the decline in single-family permits, he said production remains solid in most of Southern California, but starts are likely to be significantly below last year’s level in San Diego, the San Joaquin Valley, the Sacramento region and the Bay Area.
Layne Marceau, 2006 CBIA Chairman and a Bay Area homebuilder, said production is off this year mainly because of declining affordability, caused in large part to rising interest rates and the increase in all housing prices during the past few years.
He said the housing market seems to be normalizing, where buyers have choice and sellers have to price their properties right in order to sell them.
“However,” Marceau noted, “the affordability level of homes in California is still at an all-time low, and the first-time homebuyer is struggling to get their foot into a door of their own.”
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 buyers can afford. Total production should range between 220,000 and 240,000 homes, condos and apartments a year to keep up with the state’s rising population.
“Red tape and unnecessary regulations have added tens of thousands of dollars to the cost of a home and have hampered the industry’s ability to provide the amount of new homes and the mix of housing necessary to meet the state's long-term housing need. That can be the difference between a family being able to afford a home or continuing to rent,” he said.
He said reform legislation introduced in Sacramento this year would help ensure that enough land is available to allow well-planned growth to take place in an orderly manner. Because of the scarcity of land that has received governmental approvals, the cost of lots that are ready to build on has soared in recent years.
Other CBIA reform proposals this year include bills to create new and effective mechanisms to fund needed infrastructure improvements and streamline the process for building infill developments in urban areas.
Marceau also said the infrastructure bonds on the November ballot would help boost affordability. The bonds would provide $19.9 billion for transportation improvements, $4.09 billion to repair and maintain levees and improve the state’s flood control systems, $2.85 billion for affordable housing and $10.4 billion for school construction, modernization and other improvements.
“Because our state hasn’t done nearly enough for 30 years to keep up with growth, much of what infrastructure has been built has been paid for through what government officials call ‘developer fees,’ but what are more accurately hidden taxes paid for by new-home buyers,” he said.
“These bonds, if approved by the voters in November, should help ease the impulse many local governments have of treating builders — and thus new-home buyers — as their personal ATM machines.”
He said CBIA and its members will be working hard in the next four months to help pass the bond measures.
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The California Building Industry Association is a statewide trade association representing more than 6,700 businesses — homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. A study released earlier this year 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.
