Real Estate Articles

New-home construction in California up 21 percent in November, another sign of modest recovery

There is good news among California homebuilders as they report having pulled permits for 21 percent more homes in November when compared to the same month a year ago, according to a recent release by the California Building Industry Association (CBIA).

Statistics compiled by the Construction Industry Research Board (CIRB) show permits were pulled for 3,175 total housing units in November, up 21 percent from the same month a year ago and up 35 percent from October. Permits for single-family homes totaled 1,318, down 28 percent from November 2009 and down 10 percent from the previous month, while multifamily permits totaled 1,857, up 129 percent from a year ago and up 108 percent from October.

While the increase in the number of permits pulled was welcome news to the state’s homebuilders, they are still worried that the near-total will not be enough to keep the state from seeing the second-lowest number of housing starts on record. For the first 11 months of the year, permits were pulled for 37,944 units, up 16 percent when compared to the same period in 2009 when 32,826 permits were issued. Permits for single-family homes continued to fall behind last year’s pace, down 4 percent when compared to the first 11 months of 2009, while multifamily permits were up 59 percent.

“It’s great to see an increase in production at this time of year, but unfortunately, it looks like we’ll end up with a much more modest recovery than we had hoped for at the beginning of the year,” said Mike Winn, CBIA’s President and CEO. “The numbers are at least headed in the right direction, and we hope to see continued increases and a more robust recovery in 2011.”

Gene Lentz, president of the Silicon Valley Association of REALTORS®, noted while the increase in new-home construction was modest, it is still a good sign that a recovery is in place. “Overly tight underwriting standards are holding back the pace of a housing market recovery,” said Lentz. “In particular, creditworthy home buyers and even small business owners continue to encounter extreme difficulty in obtaining a mortgage. If more creditworthy borrowers who are willing to stay well within their budget and meet reasonable underwriting criteria are able to obtain a loan, it would help speed the housing and economic recovery.”

Economists worry that in five to 10 years California will see the beginning of a housing shortage. California Association of REALTORS® vice president and chief economist Leslie Appleton-Young told Realtors® last summer that already then there had been an 83 percent drop in building of new homes since 2004, yet household growth for the state is projected at approximately 200,000 a year.

“Housing starts are the precursor of a downturn and the leading indicator to a recovery,” Appleton-Young said.

CIRB is projects a total of 41,000 units for 2010, which would be the second-lowest total on record since records began being kept in 1954.CIRB is projecting an increase to 65,000 total units for 2011, slightly above 2008’s total of 64,962 units.

The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, e-mail , or phone (408) 200-0109.

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