California Housing Starts Drop in July
California homebuilders continued to cut back on production in July, as buyers waited and watched, the California Building Industry Association says.
The situation was exacerbated by the recent financial turmoil in the credit and lending industries, the CBIA says in a report Monday.
But two Central Valley metro areas went against the statewide trend and posted increases in July in the total number of construction permits issued.
Total housing starts in California, as measured by building permits issued, fell by 22 percent in July when compared to the same month a year ago.
In the Central Valley, total housing starts increased 34.2 percent last month over July 2006 in Fresno, which saw permits for 479 housing units of all kinds issued compared to 357 a year earlier.
The Yuba City-Marysville metro area saw a 78.5 percent total increase, although numbers were much smaller: 116 total units last month compared to 65 a year earlier.
According to housing permit data supplied by the Construction Industry Research Board, production of single-family homes fell by nearly one third statewide while multifamily units saw a slight increase in permits being pulled when compared to July of 2006.
CBIA Chief Economist Alan Nevin says builders and lenders are waiting for a signal from the market telling them to move forward, with most not yet convinced that now is the right time. As a result, builders are holding off on production in order to continue selling down their existing inventory of homes.
He warns potential buyers, however, that when the market does turn, it will probably turn quickly.
“In California, the market has historically been a ‘V’ shape in that when it turns around, it does so with great enthusiasm,” says Mr. Nevin. “As California’s economy remains strong and the job market solid, we believe the ‘V’ phenomenon will occur once more, though we hesitate to put a date on it.”
In July, permits were pulled for 5,675 single-family homes statewide, down 32.5 percent from July 2006 and down 15 percent from the previous month, while multifamily housing starts — condos and apartments — totaled 3,355, increasing 4 percent from July 2006 and up 11 percent from the previous month.
During the first seven months of the year, production began on 73,339 homes and apartments, down 32 percent from the same period last year. Single-family housing permits were down 35 percent, while multi-family starts were down 23 percent.
“The relatively minimal decline in multi-family housing production relates in part to the startup of several major rental apartment projects on land once destined for condominiums,” says Mr. Nevin.
“The inventory of new single-family units has also continued to decline, placing developers in a situation where in many cases, they are maintaining a minimum number of homes under construction,” he says.