New home production in California dropped by about 37% in May 2008 over May 2007 and will continue to decline in 2008, says CBIA.
CBIA (California Building Industry Association) said that production of new homes in California dropped by about 37% in May 2008 over May 2007, reported bizjournals.
According to CBIA, about 7,035 residential building permits were issued by statewide governments in May 2008, a drop of nearly 36.6% over May 2007, but an increase of around 12.3% as compared to 6,234 in April 2008. The production of single-family homes reached about 3,531 units, a decline of nearly 52%, whereas multi-family building decreased by about 5% and recorded 3,504 units during June 2007 to May 2008. Also, single-family home production permits reached nearly 15,254 units, a decline of around 58% from January to April 2008 over January to April 2007.
A large number of builders continuously competing for customers with foreclosure-packed resale market and not constructing new homes is the major reason for the recession in California’s housing and construction industry. Also, California’s weakening real estate market discouraged many real estate developers from initiating new projects as expenses are high and profits are low.
Further, California’s economy with soaring prices of basic commodities, high rate of unemployment, tight mortgage credit and shrinking credit card limits depicts scarcity of money with people for buying new homes. Thus, a large number of California’s consumers prefer rented homes in place of buying new ones, resulting in slowdown in the real estate industry of the country.
Moreover, CIRB (Construction Industry Research Board) forecasts that total number of new units is expected to reach 79,000 units in 2008, lowest statewide annual total since 1954. Thus, this shows that California’s housing industry will be unable to regain its growth in future too.
A RNCOS Research Analyst said, “A continuously declining housing sector of California is adversely affecting builders as well as developers of the state. The downward growth in California’s housing sector can discourage foreign players from investing in the country and this can hamper country’s economic growth. Also, slowdown in California’s housing sector is likely to continue in 2008 and this will have worse effects on house realtors of California.”
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