California Housing Production Continues Decline in September, CBIA Announces
October 23rd, 2008 categories: Our Market
2008 Forecast Now Just 66,000 Units in 2008; 67,000 units in 2009
October 21, 2008
SACRAMENTO – Analysts further reduced home building projections amid new housing statistics showing a continued decrease in production levels across the board in September, the California Building Industry Association reported today.
According to statistics compiled by the Construction Industry Research Board, 4,364 permits were pulled throughout California during the month, down 32 percent when compared to the same month a year ago and down 6 percent from August. Single-family permits totaled 2,326, down 35 percent from September 2007 but up 4 percent from August, while multifamily permits totaled 2,038, down 29 percent when compared to September 2007 and down 14 percent from the previous month.
During the first nine months of 2008, permits were pulled for 51,378 units, down 44 percent from the same period last year when 91,877 permits had been issued. Single-family permits were down 53 percent while multifamily permits dropped 29 percent.
“We are not surprised, but disheartened by the building permit statistics for the first nine months of the year,” said CBIA Chief Economist Alan Nevin. “Compared to the first nine months of 2007, single-family permits have declined by more than 50 percent and can be anticipated to end the year with under 40,000 units, a modern low for the state.”
Nevin attributed the smaller decrease in multifamily units to apartment construction.
“Although condominium construction has virtually halted throughout the state, apartment construction continues to expand, thereby bolstering the multifamily permit rate,” he said. “In total, for the year 2008, we project that permits will decline to a low of fewer than 70,000 and see little change in the velocity of ‘for sale’ construction as foreclosure resales continue to create a situation where the cost of building a new home is far higher than the prices of the resale market.”
CIRB is now projecting a total of 66,000 units for 2008, down from the 70,000 units projected last month, and next year doesn’t look any better with only 67,000 units projected for the year.
Robert Rivinius, CBIA’s President and CEO, said it’s hard to imagine an economic recovery in California without doing something to bolster the home building industry.
“The housing industry contributed nearly $40 billion to the California economy last year, and that was in a down year,” Rivinius said. “In 2005, the home building industry contributed $68 billion to the California economy and accounted for nearly 500,000 jobs. The housing industry is clearly an economic engine for the state of California and policy makers should be doing everything they can to get the industry back on track, which will help the entire economy.”
Rivinius said that policy makers need to look at ways to stimulate home building while also making sure any new legislation doesn’t further impact the home building industry.
“We need to find ways to lower impact fees, which make it very difficult to deliver housing today, come up with actions that will stimulate the housing market, and make sure not to do anything which will impede the housing delivery process.”
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What does this mean to you? With fewer and fewer new homes added to our market, supply will continue to diminish as resale inventory is absorbed. Right now, newly foreclosed properties are virtually flooding our market adding more inventory than can be effectively purchased but this will come to an end. As this inventory is absorbed, without new home starts, we will find ourselves with a dramatic shortage of housing, particularly in areas such as San Diego County. When demand exceeds supply, prices will again climb and affordability levels enjoyed today will seem nostalgic.
Until home prices stabilize there is little possibility for new home builders to begin to plan for the recovery of their sector. The costs of building, including land, remain an obstacle to profitability and combined with plummeting home prices, are creating an impossible situation for home builders to continue building.
Once building does resume, we believe the face of the new home industry will have changed considerably and permanently. We believe the days of the large, public home builders are over in places like San Diego County where there are no master planned communities left to develop. Small, infill home builders will take over our local industry and that may not be a bad thing at all. We believe it will lead to a more diverse selection of architecture and less ‘cookie cutter’ tract housing- more customization by home buyers and less unilateral stylizing (sometimes considered sterilizing) by builders that base their decisions on cost effectiveness rather than reacting to what the market wants in a home.
Times change and the outlook for home building in San Diego is changing. Ultimately San Diego will have a vibrant, tending toward exclusive Real Estate market as supply is curtailed and demand continues to grow. It should make one serious about getting a piece of paradise while it’s a great deal. It won’t always be this way. Remember, LOVE Where You Live~ JB Home Sellers will help you get there.
