Housing Production Continues Decline in California
October 26, 2007
SACRAMENTO — Home production in California continued to decline in September as homebuilders continued to sell off existing inventory and looked for signs of a balancing market, the California Building Industry Association reported today.
Total housing starts in California, as measured by building permits issued, dropped 46 percent in September when compared to the same month a year ago to 6,447, according to housing permit data supplied by the Construction Industry Research Board. Production of single-family homes fell 50 percent while construction of multifamily units decreased 40 percent when compared to September of 2006.
In September, permits were pulled for 3,468 single-family homes statewide, down 50 percent from September 2006 and down 34 percent from the previous month, while multifamily housing starts — condos and apartments — totaled 2,979, decreasing 40 percent from September 2006 and down 50 percent from the previous month.
During the first nine months of the year, production began on 91,394 homes and apartments, down 31 percent from the same period last year. Single-family housing permits for the year are down 36 percent, while multifamily starts are down 20 percent.
CBIA Chief Economist Alan Nevin noted that the most severe decline in the single-family sector in a major metropolitan area occurred in the Riverside/San Bernardino market, off 50 percent from the first nine months of 2006. Other areas such as San Jose and Fresno saw modest declines of around five percent.
“The development of rental apartments, including numerous subsidized projects, has been responsible for the multi-family category declining far less than single-family units,” Nevin said. “Several major metropolitan areas like Los Angeles and San Francisco had minimal declines in the first nine months of the year.”
Nevin also cited the decline of per-project inventory as a sign that the new home market would move back into balance in the near term future. He said that homebuilders are modifying their price schedules in an effort to deplete the inventory.
“Many of the homebuilders are determined to minimize their inventories by year-end,” he said. “As a result, the buyer is in a particularly advantageous position to buy a home now, especially with 30 year fixed interest rates at 6.0% or less.”
CBIA President and CEO Robert Rivinius said that this is an excellent time to shop for a new home. “Once the balance returns to the market, prices will again be going up, as we won’t have the supply to meet the pent up demand,” Rivinius said.
Rivinius added that new legislation must still be enacted to ease restrictions on homebuilders to allow for greater affordability. “With development fees continuing to grow in all parts of the state and increased restrictions on growth becoming more prevalent, the dream of owning a home will become less attainable,” Rivinius said.
“New policies and legislation that ease regulations on new home construction are still needed to help stimulate production and make homes more affordable for everyone, especially first-time buyers,” he said.
In the meantime, he said many good deals are available now for new homebuyers.
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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. 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.
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.
