Housing production in California fell for the second year in a row in 2006, the California Building Industry Association announced today, dropping 22 percent compared to 2005.
New single-family housing units, measured by building permits issued in California metro areas, dropped from 155,322 in 2005 to 106,953 in 2006, according to preliminary year-end data compiled by the Construction Industry Research Board, an industry research center, while new condo and apartment units increased 5.3 percent compared to 2005.
In December, single-family housing starts dropped 44 percent compared to December 2005 and fell 12 percent compared to November 2006. Meanwhile, multifamily starts — which the association notes can be “very volatile from month to month” — rose 38 percent compared to December 2005 and 41 percent compared to November 2006.
Single-family housing starts dropped in every metro area tracked in California in 2006 compared to 2005, dropping 55.6 percent in the Yuba City-Maryville area, 53.1 percent in the Napa area, 50.3 percent in the Vallejo-Fairfield area, 49.2 percent in the Modesto area and 43.5 percent in the Sacramento-Roseville area. The smallest drop was in the Visalia-Porterville area at 5.5 percent.
Total starts in December were down 22 percent compared to December 2005 and up 8 percent compared to November 2006.
CBIA Chief Economist Alan Nevin said in a statement that the drop can be attributed to a normalizing market and a focus by builders on moving existing inventory. He said that new-home construction in California will continue to level off until builders sell off their remaining inventory, a process that probably won’t be completed until early this year, according to the announcement.
“The single-family building-permit count came in decidedly weaker than we had anticipated when we prepared our revised mid-year 2006 projections,” Nevin said. “We had projected single-family permits at the 125,000-135,000 level. Three metropolitan areas accounted for the lion’s share of the declines: Riverside/San Bernardino, Sacramento and San Diego. The tail-off in the fourth quarter was unprecedented and relates to a concerted effort by developers to void their inventories by year end.”
Nevin said the multifamily permit count was in line with his 2006 projections.
“The year ended 5 percent ahead of 2005’s 53,650 units. The strength of the condominium market in most major areas has proven to be stronger than anticipated, reflecting heightened activity in Los Angeles and the San Francisco-Oakland Bay Area,” he said.
Nevin has forecast housing starts for single-family homes, condos and apartments will total between 155,000-170,000 this year, keeping pace with 2006. “We are returning to a normal market,” Nevin stated.
The California Building Industry Association represents about 6,700 businesses, including home builders, remodelers, subcontractors, architects, engineers, designers and other industry professionals.