California Housing Market Remains a Disaster
California has long been considered as bellweather state in real estate as in other areas. If the usually upbeat National Association of Homebuilders (NAHB) newsletter means anything the rest of the nation is in for a long tough time with new home construction.
The following is from the July 1, 2008 issue of the NAHB’s Nation’s Building News.
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While the underlying demographics for housing remain strong in California and are expected to gain even greater strength as its population continues to grow, the immediate outlook is grim and the industry remains in dire straits, representatives from the California Building Industry Association (CBIA) told the media at a June 25 news conference in San Francisco during the annual PCBC conference and tradeshow.
The state’s home building industry will languish well into next year, with some areas performing noticeably better than others, and the marketplace could sustain even more damage if lawmakers fail to move forward with stimulus legislation aimed at propping up the economy by stabilizing housing conditions.
“Without reforms being considered right now in Sacramento and Washington, D.C., I fear many more builders will go out of business and many more jobs will be lost,” said Ray Becker, a Bay Area developer and this year’s chair of CBIA. “Equally important, this attrition will make it even more difficult to ramp up production when the market finally does start to turn.”
In a sharp plunge from peak levels averaging about 210,000 units in 2004 and 2005, this year’s construction levels are projected to sink below 80,000 permits, to the lowest level since those figures first started being compiled in 1954, noted Robert Rivinius, the association’s president and CEO.
“We need 230,000 starts a year just to meet our growing population,” Rivinius said.
Despite the current housing slump, California’s population will grow by 490,000 this year alone, said Alan Nevin, CBIA’s chief economist, reaching 38 million and advancing to 40 million by 2011, not counting residents who are illegal immigrants.
“It doesn’t appear to make much difference whether there are jobs here or housing here,” Nevin said. “We just keep growing.”
On the employment front, the state’s residential real estate sector clearly has borne the brunt of the economic downturn, with nearly 200,000 home building-related jobs lost during the past two years — before counting the negative impact on furniture distributors, interior decorators, landscapers and others who increasingly have been going out of business.
“During the past two years, the state reported a loss of 181,300 construction, finance and insurance jobs,” Nevin said. “But in fact, the job losses related to construction have been much more severe as the multiplier effect of the construction industry is higher than any other.”
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To read the remainder of the news go to Nation’s Homebuilder News.
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