Single-family housing starts plunge 37 percent

LOS ANGELES
January 2, 2007 10:45am

California builders started 37.7 percent fewer single-family homes in November 2006 than they did a year earlier, according to figures released Tuesday by the California Building Industry Association.

Single-family starts were sharply lower across most of the Central Valley with only the Yuba City-Marysville metropolitan area seeing a gain. It posted a 24.6 percent year-over-year increase.

While comparisons to November 2005 were almost uniformly down, there were some metro areas that saw increases over October 2006 numbers, the CBIA says.

Homebuilders’ continuing efforts to reduce their standing inventory and the Thanksgiving holiday are cited by the CBIA as reasons for the slump.

When multi-family housing starts are included in the mix, overall housing production dropped by 9 percent in November compared to October and by almost 34 percent when compared to November 2005, the California Building Industry Association says.

In November, permits were pulled for 5,989 single-family homes statewide, down 3 percent from the previous month and down 38 percent from November 2005, while multifamily housing starts — condos and apartments — totaled 3,723, down 17 percent from the previous month and down 26 percent from November 2005.

In the Central Valley, most markets saw sharp declines in single-family housing starts in November, compared to a year earlier:

• Bakersfield, down 51.4 percent

• Chico, down 48.5 percent

• Fresno, down 61.6 percent

• Hanford, down 13.2 percent

• Madera, down 64.1 percent

• Merced, down 70.2 percent

• Modesto, down 43.8 percent

• Sacramento, down 42.1 percent

• Stockton, down 3.3 percent

• Visalia-Porterville, down 4.2 percent

• Yuba City-Marysville, up 24.6 percent

Overall for the month, builders statewide pulled permits for 9,712 homes, condos and apartments, according to statistics compiled by the Burbank-based Construction Industry Research Board (CIRB).

During the first 11 months of 2006, total housing production was down 22 percent from the previous year.

However, CIRB Research Director Ben Bartolotto says that once the numbers are seasonally adjusted, the picture is not as bleak. He says the seasonally adjusted single-family figure for November 2006 is actually up 11.9 percent from October 2006, though still down 41 percent from November 2005.

“The seasonally adjusted annual rates for total units were practically unchanged in November from October — 126,000 in November and 126,700 in October — but down 37.1 percent from November 2005,” Mr. Bartolotto says.

CBIA Chief Economist Alan Nevin says new-home construction in California is expected to continue leveling off until builders sell off their standing inventory, a process that probably won’t be completed until early 2007.

“The trends evident in the earlier months of the year are continuing. Single-family permits are down for the first 11 months of the year. Three metropolitan areas account for almost half of the decline in permits: San Diego, Sacramento and Riverside/San Bernardino,” he says.

But Mr. Nevin says multifamily permits are on course to match those of last year and that strong increases in multifamily production have been recorded this year in the East Bay, Los Angeles and Orange County.

“Overall, the total permit count is down 22 percent for 2006. It now appears that at year's end, we will not achieve the projected 180,000 units for 2006,” he says.

Robert Rivinius, CBIA’s President and CEO, says the market slowdown is likely to do very little to help ease the state’s housing affordability crisis.

“California has a limited supply of land in private hands that can be developed and very high costs of government regulation and impact fees, which means we really can’t see new home prices dropping significantly,” he says.

He says local “developer fees” boost the cost of homes significantly. In many cities, fees total more than $50,000 per home and fees in excess of $100,000 per home are not unheard of, he says.