California single-family starts down 35% from last year

Single-family housing starts in California have fallen about 35 percent for the first eight months of the year compared to the same period last year, as measured by building permits issued, the California Building Industry Association reported this week.

Building permits issued for single-family units in the state dropped 34.6 percent in August 2007 compared to August 2006, according to data compiled by the Construction Industry Research Board, a nonprofit research center.

Meanwhile, building permits issued for construction of multifamily units dropped 18.9 percent during the first eight months of the year compared to the same period last year, and building permits issued for multifamily construction in the state jumped 58.6 percent in August 2007 compared to August 2006.

The number of single-family permits issued dropped most dramatically in the Merced area in California’s Central Valley, falling 72.4 percent in August compared to August 2006 and falling 65.2 percent for the first eight months of 2007 compared to the same period last year.

Single-family permits are also down 62.8 percent from January to August in the El Centro area compared to the same period last year, down 61.9 percent in the Madera area, 50.6 percent in the Oxnard-Thousand Oaks-Ventura area, 49.4 percent in the Riverside-San Bernardino-Ontario area, 46.6 percent in the San Luis Obispo-Paso Robles area, 45.7 percent in the Modesto area, 45.5 percent in the Santa Ana-Anaheim-Irvine area, 42.1 percent in the Santa Cruz-Watsonville area and 39.1 percent in the Bakersfield area.

Single-family permits were up 21 percent in the San Francisco-San Mateo-Redwood City area during that eight-month period, and also rose 1.7 percent in the San Jose-Sunnyvale-Santa Clara and Yuba City-Marysville areas while falling in all other areas tracked in the report.

And total permits issued, including single-family and multifamily permits, dropped most in Merced — falling 65.7 percent for the first eight months of the year compared to the same period last year.

Total permits were also down 63.6 percent in the Madera area, 57.3 percent in Napa, 51.4 percent in El Centro, 45.2 percent in Riverside-San Bernardino-Ontario, 36.9 percent in Bakersfield, 36.5 percent in Oakland-Fremont-Hayward, 33.8 percent in San Luis Obispo-Paso Robles, 33.6 percent in San Diego-Carlsbad-San Marcos, and down 31.1 percent in Modesto, according to the report.

The Santa Cruz-Watsonville area experienced the biggest gain in total permits issued during that period, rising 24.8 percent, followed by Salinas, up 19.4 percent; Yuba City-Marysville, up 8.5 percent; and Fresno, up 6.9 percent, while falling in all other areas of the state tracked in the report.

There were a total of 10,825 single-family and multifamily building permits pulled in California in August, and 84,492 permits for the first eight months of the year.

About half of the decline in single-family home production this year is attributed to the Riverside-San Bernardino market area, said Alan Nevin, chief economist for the building association, in a statement, with production in other parts of the state down about 25 percent.

Nevin also stated in the report that the number of completed unsold homes continues to decline as builders wait to begin construction on new homes until the existing inventory declines.

“Builders have learned that it’s far less expensive to pay the interest on a lot than the interest on a completed unsold home,” according to the announcement.

Apartment projects account for the bulk of the multifamily starts this year as builders and lenders have withdrawn from high-density condo projects, Nevin also said in the announcement.

“It is unfortunate that higher-density condominium construction has almost stopped because once the market turns around, it generally still takes two to three years to complete a new project, therefore, there will inevitably be a supply-demand imbalance,” he stated.

CBIA represents an estimated 7,000 businesses, including builders, remodelers, subcontractors, architects, engineers, designers and other industry professionals.

Source: Construction Industry Research Board