Total Housing Production Edges Upward in August, CBIA Reports
Homebuilders Predict Market to Stabilize by End of Year
September 28, 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 — Led by a surge in multifamily permits, August housing starts climbed by 14 percent compared to July, the California Building Industry Association announced today.
In August, building permits were pulled for 7,838 single-family homes statewide, down 5.9 percent from the previous month, while multifamily housing starts — condos and apartments — totaled 5,290, up 68.1 percent from the previous month. Overall for the month, builders pulled permits for 13,128 homes, condos and apartments, according to statistics compiled by the Burbank-based Construction Industry Research Board.
Year-to-date totals remain significantly lower than last year, and 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 adjusts from a superheated state to more normal conditions.
"Permit activity through August indicates that California will achieve our forecasted level of 180,000 units permitted in 2006, which would still be the fourth-highest total in the past 17 years,” Nevin said.
He noted that builders will continue to reduce their standing inventory of unsold homes that are under construction or completed, and are now using aggressive marketing techniques to reduce their inventory.
“Single-family permits are down 25 percent in the first eight months of the year as builders continue to reduce their standing inventory in preparation for new product introductions in 2007. At the present rate, we anticipate that the inventory will be nearly depleted by the end of the third quarter.” Nevin said. “From that point on, builders will only build what they can pre-sell.”
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 that single-family starts are expected to drop to between 125,000 and 135,000, compared to nearly 155,000 in 2005.
“Multifamily production continues to rise, with particularly strong activity in Los Angeles, Orange County, and the San Francisco Bay Area — much of it related to vertical construction in the urban core.”
Layne Marceau, 2006 CBIA Chairman and a Bay Area homebuilder, says that housing seems to be returning to a “normal” market, where buyers have choice and sellers have to price their properties right in order to sell them. But he added that the supply of homes for first-time buyers remains all but nonexistent, noting that a report issued last month revealed that 20 of the 21 least-affordable metropolitan areas in the nation are located in California.
“For far too many California families, home prices today are simply not affordable — and even if the real estate naysayers’ predictions of a drastic market correction came true, housing would still be unaffordable for most first-time buyers,” he said.
Marceau said red tape and unnecessary regulations have hampered the industry’s ability to provide the amount of new homes and the mix of housing needed to meet the state's long-term housing needs, adding tens of thousands of dollars to the cost of a home before builders can even break ground.
“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 homebuyers can afford.” Marceau said.
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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.
