Single-family housing starts have declined 27.2 percent for the first five months of the year compared to the first five months of 2005, according to a report by the California Building Industry Association, and starts were 22.4 percent lower in May 2006 than in May 2005.
Housing starts increased 2.6 percent from April to May this year, and starts for the year are expected to be the fourth-highest annual total in the past 17 years, the association reported.
In May, permits were pulled for 11,576 single-family homes statewide, and single-family permits have increased each month this year, according to statistics compiled by the Burbank-based Construction Industry Research Board.
Condo and apartment starts increased 7.4 percent from April to May this year to a total of 3,687, and starts were up 6.4 percent for the first five months of the year compared to the first five months of 2005. But multifamily starts fell 16.9 percent in May 2006 compared to May 2005.
Overall for the month of May, builders pulled permits for 15,263 homes and apartments, an increase of 3.7 percent compared to April.
CBIA Chief Economist Alan Nevin said in a statement that the numbers reflect a housing market that is adjusting from a superheated state to more normal conditions. He expects overall housing starts in California this year to total between 170,000 and 180,000, down 15 percent to 20 percent from 2005 but above production levels during the 1990s.
In a midyear housing forecast released last week, Nevin said he expects multifamily construction to remain strong in most markets and he expects starts to total between 45,000 and 55,000 units — about the same as last year’s levels — with single-family starts to drop to between 125,000-135,000 compared to nearly 155,000 in 2005.
“In the Bay Area, Orange County and in the Los Angeles Basin, we see continuing strength in multifamily construction, most of it higher-density condominiums in the urban core,” Nevin said. “Most other markets are holding steady in multifamily units, with the exception of San Diego County, where development has declined markedly, predominantly because of a near-total cutback in downtown high-rise development.”
Nevin also stated that production remains solid in most of Southern California, though starts are likely to be significantly below last year’s level in San Diego, the San Joaquin Valley, the Sacramento region and the Bay Area.
Layne Marceau, 2006 CBIA Chairman and a Bay Area home builder, said declining affordability, caused in large part to rising interest rates and the increase in all housing prices during the past few years, are to blame for declining starts.
“The affordability level of homes in California is still at an all-time low, and the first-time home buyer is struggling to get their foot into a door of their own,” Marceau stated, calling for assistance from state and local governments to promote more housing production.
Infrastructure bonds on the November ballot would help boost affordability, he stated, as they would provide $19.9 billion for transportation improvements, $4.09 billion to repair and maintain levees and improve the state’s flood control systems, $2.85 billion for affordable housing and $10.4 billion for school construction, modernization and other improvements.
The CBIA represents about 6,700 business, including home builders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals.