Economy Continues to Hammer Homebuilders

SACRAMENTO, CA - California housing production continued to sag in September, according to a report released Tuesday by the California Building Industry Association. According to statistics compiled by the Construction Industry Research Board, 4,364 permits were pulled throughout California during the month, down 32 percent 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. Multifamily permits totaled 2,038, down 29 percent year over year and off 14 percent from the previous month. During the first nine months, 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," CBIA Chief Economist Alan Nevin said. "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 homebuilding 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 homebuilding 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."