Housing Production Drops 20 Percent in September
Builders will continue to clear out existing inventory for remainder of 2006
October 27, 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 — Due to a stubbornly high level of new homes for sale, overall housing production dropped by over 13 percent in September when compared to August, the California Building Industry Association announced today.
In September, permits were pulled for 6,727 single-family homes statewide, down 15 percent from the previous month, while multifamily housing starts — condos and apartments — totaled 4,863, down 9.7 percent from the previous month. Overall for the month, builders pulled permits for 11,590 homes, condos and apartments, according to statistics compiled by the Burbank-based Construction Industry Research Board (CIRB).
The CIRB notes that it was the fewest number of permits issued in a September since the 6,097 permits issued in September 1996.
CBIA Chief Economist Alan Nevin said that new-home construction in California is expected to continue cooling off for the remainder of 2006 as the housing market continues its slow adjustment from a superheated state to more normal conditions.
“Permit activity through September indicates that California will achieve our forecasted level of 180,000 units permitted in 2006,” Nevin said.
He noted that builders will continue to reduce their standing inventory of unsold homes that are under construction or completed, and that most are using aggressive marketing techniques to reduce their inventory.
“As expected, the single-family sector remains challenged as homebuilders work toward reducing their year-end inventory. Through the first nine months of the year, single-family units permitted declined 29 percent from the first nine months of 2005. Almost half of the decline was in Riverside/San Bernardino, Sacramento and San Diego. Most of the balance of the state has seen significantly fewer declines. In other words, the other 55 counties in California evidenced a decline of single-family permits averaging 20 percent,” Nevin said.
Nevin predicts that multifamily construction will remain strong in most markets and expects starts to total between 45,000 and 55,000 units – about the same as last year’s levels – but says single-family starts are expected to drop to between 125,000 and 135,000, compared to nearly 155,000 in 2005.
“On the multi-family side, the permit count advanced 4 percent with 41,863 units permitted through the 3rd quarter. Most of that gain is the result of increases in the Los Angeles metropolitan area,” Nevin noted.
Wes Keusder, 2007 CBIA Chairman and a Southern California homebuilder, said the reduction in starts will reduce the large number of new homes on the market today . This will stabilize the market, which he said means that buyers now have the biggest selection of new homes to choose from.
“We have definitely been experiencing a cooling off this year,” Keusder said. “Last year we had a waiting list of buyers interested in our homes before they were even built. This year, however, it seems as though we’re the ones who are waiting.”
However, Keusder added, just because the market is slowing doesn’t mean that prices will fall dramatically.
“While there remains great pent-up demand for lower-cost homes, government constraints now make it all but impossible to build homes for first-time buyers, so builders will build just enough homes to meet the demand in the higher price ranges. Builders can’t sell homes for less than it costs to build them,” he said.
“California is the second least-affordable state in the nation, with 20 of the 21 least-affordable metropolitan areas in the nation located here. State and local governments need to work with the industry to promote expanded production, through approval of more residential units, thus increasing the supply of houses. Local governments also must lower the extraordinarily high fees to increase the production of entry-level condos and other homes that first-time homebuyers can afford.”
“Red tape and unnecessary regulations are to affordable housing what kryptonite is to Superman: it renders the industry powerless to build the amount of affordable new homes and the mix of housing we need to meet the state's long-term housing needs. Tens of thousands of dollars are added unnecessarily to the cost of new homes because of it.”
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The California Building Industry Association is a statewide trade association representing some 6,700 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
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.
