The pace of California new-home sales rose above year-ago levels for the first time since December of 2006, the California Building Industry Association reported this month. Real estate industry officials see this as a positive sign which could ease the state's unemployment rate and address the need for more housing.
The monthly CBIA/Hanley Wood Market Intelligence (HWMI) new-home sales and pricing report showed sales in new-home communities of 10 units or more were 25 percent above October 2008, a strong improvement from the year-over-year decline last month and represents the first notable increase since the start of the housing downturn. During October, 2,294 new homes and condominiums were sold in the subdivisions tracked by HWMI, compared to 1,838 in October 2008. Sales of single-family homes were up by 4 percent, while sales of townhomes and "plexes" – duplexes, triplexes, etc. – were up 36 percent; sales of condominiums were 94 percent higher than a year ago, thanks to strong sales at projects in the Los Angeles and San Francisco areas. Non-seasonally adjusted total new-home sales were 1 percent below levels seen last month.
Compared with the same period last year, the median base price of homes sold was still down, however, dropping 4 percent.
Jonathan Dienhart, director of published research for HWMI, noted the encouraging figures should be kept in perspective. "While this month's figures are encouraging, we must keep in mind that we're comparing the figures to October of 2008, which was the second lowest month of nominal sales we've seen during the downturn," Dienhart said. "Examining the data in a rolling twelve months tells a more realistic increase, with a 1.5 percent rise from last month."
Dienhart explained the rise could also be due to buyers rushing into the market to take advantage of a federal tax credit that was due to expire shortly after this time period.
Liz Snow, CBIA's president and CEO, noted increased home sales will lead to more job-generating new-home construction. "Studies show that each new home built generates anywhere from two to three jobs and produces roughly $16,000 and $3,000 in tax revenues for state and local government, respectively," said Snow. "We hope our state lawmakers will take into account the profound economic and fiscal benefits generated by the housing industry and take action to bolster the housing sector in hopes of encouraging a broader economic recovery in 2010."
At a Silicon Valley Association of REALTORS® meeting this fall, California Association of REALTORS® executive vice president Joel Singer echoed the same sentiments as Snow and emphasized the importance of the construction industry to California. Construction, he said, is one of the industries hit badly by the recession and the state is likely to feel the effects of cutbacks in homebuilding in the future.
"Unemployment is a big problem for California," Singer said. "The state is very dependent on construction. The population of California continues to grow and we are not building enough to sustain demand."
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