Housing forecast scaled back

SAN FRANCISCO
May 31, 2007 10:54am

A slowdown in housing demand in the Central Valley and in the Riverside-San Bernardino area of Southern California is being cited as the reason for a drop in projected new home starts this year.

“Residential permit activity had been projected to be in the 155,000-175,000 unit range for the state. Based on activity for the first few months of the year, we have modified the projection to the 135,000-155,000 range. That reduction is due primarily to the decline of permit activity in the Riverside/San Bernardino and the Central Valley areas,” says Alan Nevin, chief economist for the California Building Industry Association.

He says because potential homebuyers are sitting on the sidelines, hoping prices will drop further, the market remains soft.

“From an economist’s standpoint, we do not think this will be the case, as homebuilders have reduced their inventories of unsold homes, for the most part, and no longer have the need to exhaust those inventories,” Mr. Nevin says in his report. “Thus, the supply will match the demand.”

The CBIA says sales in the single-family market will gradually accelerate throughout the summer and then plateau during the balance of the year in most areas of the state.

“As a result of this decline, we have revised our projections downward for the single-family sector to a range of 90,000-100,000 units,” Mr. Nevin says

In January, the CBIA projected that the year would see 25,000-28,500 homes built, most of them single family units. That’s now been revised to 20,000-23,500 total units.

The entire estimated drop is in single-family homes.

The latest projection estimated 3,000-3,500 multi-family units will be built in the Central Valley this year – the same as the CBIA’s January forecast.