California construction activity down to 25-year low

As further proof that California's homebuilders have been continuing to postpone new projects, the California Building Industry Association recently announced that new home production has reached a 25-year low. From the group's press release:

California single-family home construction in 2007 fell to the lowest level in 25 years as builders around the state dramatically ratcheted back production in response to a softer sales environment, the California Building Industry Association reported today.

According to statewide data compiled by the Construction Industry Research Board, permits for 112,300 new homes, condominiums, townhomes and apartments were issued statewide, down nearly 32 percent from 2006 and 100,000 units less than recorded in the most recent peak year of 2004.

While multifamily construction – both for-sale and rental properties – was down 21 percent, to 44,307, single-family construction dropped by 37 percent to 67,993, the lowest number of starts since the 51,160 recorded in 1982.

Alan Nevin, Chief Economist for the association, is hopeful that production will pick up as buyers of resale homes re-enter the marketplace:

“The resale market is anticipated to pick up substantially in the next few weeks in California as the buyers who have been sitting on the fence return to the marketplace. Resales drive the new-home market. Typically, there are 4-5 resales sold for every one new home built in California. Therefore, the vibrancy of the resale market will generate demand for new sale housing. It is likely that we will see this situation materialize by the 3rd quarter, perhaps sooner.

“And because the inventory of new homes is low, builders will not have to offer major concessions to entice buyers into new homes. If there is one problem looming, it’s actually the scarcity of new product in most urban areas.”

For the table summarizing housing starts for December 2007, click here. For similar data for all of 2007, click here.