October Housing Production Drops Again – to Lowest Level on Record, CBIA Announces
Homebuilding remains mired in depression with no relief in sight. Builders say true tax credit is needed to jumpstart housing industry.
November 25, 2008
SACRAMENTO – Housing production in California in October was the lowest on record, prompting the California Building Industry Association to urgently call on state and federal lawmakers to act immediately to stimulate the moribund housing sector and create new jobs. Specifically, homebuilders are proposing a tax credit for new-home buyers which has proven in the past to be an effective means of reviving depressed housing markets and putting back on track job generating home construction.
“No other industry in California or the nation for that matter produces jobs like new home construction,” said Robert Rivinius, President and CEO of the California Building Industry Association. “The steady decline in new housing production which began in 2005 has cost California nearly 300,000 jobs.”
According to statistics compiled by the Construction Industry Research Board, just 4,140 permits were pulled throughout California during the month of October, down 49 percent when compared to the same month a year ago and down 9 percent from September. On a seasonally adjusted basis, October’s unit total was at an annual rate of 46,300, which CIRB said was the lowest month recorded since monthly rates began being tabulated in January 1976.
“These numbers signal the critical need for action by government – at the state and federal levels – to reverse this destructive, downward spiral that is not only costing California jobs but is sinking the state and national economy,” said Rivinius.
California homebuilders believe a tax credit will stimulate renewed activity in housing markets throughout the state as was proven decades ago when Congress, in a similar situation, enacted a temporary homebuyer tax credit. Within months of its enactment home sales doubled and within two years new housing construction nation wide was back to normal.
“The time to act is now,” said Rivinius.
Today’s news from CIRB was sobering. Single-family permits totaled 2,281, down 45 percent from October 2007 and down 6 percent from September, while multifamily permits totaled 1,859, down 54 percent when compared to October 2007 and down 12 percent from the previous month. The seasonally adjusted single-family rate of 25,300 permits pulled also set a new monthly low since 1976.
During the first 10 months of 2008, permits were pulled for 55,669 units, down 44 percent from the same period last year when 100,024 permits had been issued. Single-family permits were down 52 percent while multifamily permits dropped 32 percent.
For all of 2008, production is expected to be less than 66,000 new homes, condominiums and apartments, the lowest level since records began being kept in 1954, and the current projections for 2009 point to an even lower level of construction.
Rivinius noted that the state’s lagging economy is not likely to recover until homebuilding begins to recover.
“California can’t afford another year of economic depression in the housing sector,” said Rivinius. “Studies show that the state economy benefits greatly when housing production is operating at healthy levels.”
Indeed, a study by the Sacramento Regional Research Institute released in August found that the 40 percent decline in homebuilding between 2005 and 2007 had resulted in the loss of more than 221,000 jobs and $28 billion in economic benefit and its gotten much worse since the study was conducted. As the state’s economy suffers, so too, said Rivinius, do state and local treasuries. Rivinius said the estimated loss of state revenues due to low housing production in 2007 was well over $2 billion. That, too, increased this year.
“As state leaders mull over how they are going to bring the state’s fiscal house back in order they need to consider the profound economic and fiscal benefits of building housing,” said Rivinius. “New housing construction puts people back to work, puts money in the bank and brings California out of its current economic funk. Action is needed today.”
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The California Building Industry Association is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. 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.
