Housing Production Continues Downward in October
Homebuilders Urge Federal, State and Local Officials to Enact Reforms to Jumpstart Industry
November 28, 2007
SACRAMENTO — Production of homes in California continued a downward trend in October as homebuilders continued to take steps to reduce inventory before year-end, the California Building Industry Association reported today.
Total housing starts in California, as measured by building permits issued, dropped 28 percent in October when compared to the same month a year ago to 7,726, according to housing permit data supplied by the Construction Industry Research Board. Production of single-family homes fell 41 percent while construction of multifamily units decreased 10 percent when compared to October of 2006.
In October, permits were pulled for just 3,719 single-family homes statewide, down 41 percent from October 2006 but up 5 percent from the previous month, while multifamily housing starts — condos and apartments — totaled 4,007, decreasing 10 percent from October 2006 while showing a 41 percent increase from the previous month.
During the first 10 months of the year, production began on 99,088 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 for the year.
CBIA Chief Economist Alan Nevin cited homebuilders’ attempts to sell off existing inventory before the end of the year as a major factor in the decline in the single-family sector, where the credit crunch has made it increasingly difficult for even qualified buyers with good credit to purchase a home.
He also noted that production of single family homes for the first 10 months of the year is at about two-thirds the level of production seen during the same time-frame a year ago, with much of the decline taking place in the Inland Empire, San Joaquin Valley, and Sacramento.
Nevin said production of multifamily units totaled 38,083 for the first 10 months of the year, about 80 percent of the units produced during the same time period in 2006.
“Most areas saw modest losses in the multifamily sector, with very few experiencing the type of drop-offs evident in the single-family sector,” Nevin said. “There may be some modest upturns in the multifamily sector in November and December as builders of vertical product try to permit their projects ahead of the new building codes that go into effect in January 2008.”
CBIA President and CEO Robert Rivinius said the continued housing slump will cause even more problems for state and local policymakers as they scramble to fill budget holes caused by the fact that homebuilding – which has been an economic engine for most of the past decade – is no longer generating the employment and tax revenues it had been. He said reforms are urgently needed in Washington, D.C., Sacramento, and city hall alike.
“On the national level, Congress needs to pass lending reforms that would increase the ability of Fannie Mae and Freddie Mac to refinance adjustable-rate mortgages in high-cost states like California, and we would urge senators to pass pending legislation as soon as they return next week from their Thanksgiving recess.
“Here in California, our Legislature and regulators need to remember that laws and regulations they have enacted over the past quarter-century have been a major reason why housing is so much more expensive in California than anywhere else in the country – and to keep that in mind the next time they feel the urge to impose even more costs and make homes even less affordable.
“And finally, cities and counties that have seen homebuilders and homebuyers as a bottomless money pit should take a hard look at the fees that they have imposed over the years, which in some cases now exceed $100,000 per home or condominium unit. Reducing or even eliminating these fees would go a long way towards jump-starting the homebuilding industry and generating more revenues for the state and local coffers.”
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.
