California Homebuilders ‘Ready For A Slow-Down’
Inman News reports the homebuilders in California didn’t take advantage of the warm January weather. “California housing production dropped about 10 percent from January 2005 to January 2006, the California Building Industry Association announced today. Housing starts (as measured by building permits issued) totaled 12,357 in January, a decrease of 1,430 units compared to January 2005.”
“The total includes 9,036 single-family homes (down 10.4 percent from January 2005) and 3,321 apartments and condominiums (also down 10.4 percent from January 2005). Overall, starts were down 8 percent from the previous month of December. Single-family starts dropped 6.8 percent and multifamily starts dropped 11.1 percent.”
“CBIA Chief Economist Alan Nevin said that construction is expected to pick up in the second quarter of the year. Layne Marceau, 2006 CBIA Chairman and a San Francisco Bay Area home builder, said that production is not keeping up with the demand for new homes and apartments. Marceau (blamed) a shortage of land that is ‘zoned and ready to build new homes, condos and apartments.’”
“The CBIA is a statewide trade association representing about 6,500 businesses, including home builders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. A recent study determined that home-building generates approximately $60 billion a year to the California economy and creates an estimated 526,000 jobs statewide.”
From the associations website. “”Once again, the construction industry was the shining star in 2005, accounting for 13 percent of all new jobs in the state. In both 2004 and 2005, one out of seven new jobs was in construction.”
“In 2006, we should see a gentle slowdown of single-family construction. Riverside/San Bernardino experienced a major slowdown in new job growth in 2005, with wage and salary jobs increasing by approximately 25,000, only half the gain of 2004. It appears that 2004 was a positive aberration, but not likely to be repeated in the near future. As in each of the past four years, construction accounted for one-fourth of all new wage and salary jobs.”
“2006 will be a slowdown year for San Diego, both in terms of job gains and construction. Although 2005 saw a large gain in employment, few of the gains were in the basic industries that drive the economy. Most job gains in the past year were in support jobs like retailing, local services, and local government. Of all wage and salary jobs (ones which receive W-2’s), fully one-third resulted from gains in construction.”
From Hovnanian financial results yesterday. “Profits for homebuilder Hovnanian Enterprises Inc. were flat in the first quarter amid other signs that the housing market is cooling. Hovnanian saw the number of home contracts decline by almost 11 percent in the Southwest and 37 percent in the West.”
headline suggestion for the week:
“i see debt people”
Good one!
Casualties of the housing bubble.
The loss is haunting.
“Layne Marceau, 2006 CBIA Chairman and a San Francisco Bay Area home builder, said that production is not keeping up with the demand for new homes and apartments. Marceau (blamed) a shortage of land that is ‘zoned and ready to build new homes, condos and apartments.”
The comments don’t apply to SD; we have a surplus of land that is bulldozed and ready to build…
Plenty of available land here in Central California. We could build homes for 20 million people and still have room left.!
Weren’t the national housing starts up 14% in January? This is the employment trap that Arizona is in also. Mortgage firms are laying people off. An economy reliant on building and selling each other houses doesn’t look so bright now.
From the article:
I guess us naysayers are way off the mark. According to these guys supply can’t keep up with demand.
The CBIA spokespeople apparently attend the same spin class as the NAR. and I don’t mean the one with bicycles.
If we can’t keep up with demand then why is inventory growing and whey are prices remaining flat? And how are they calculating “demand”, i.e. that 240,000 number? And just becuase there are X number of people out there who want to buy homes does NOT mean that all of them desire or can afford a brand-new one.
“Most job gains in the past year were in support jobs like retailing,”
Depends on the seized-up housing ATM…
“local services,”
realtors, mortgage brokers, etc.
“and local government.”
SD city govt is $1.5 b in the hole due to the pension scandal
“Of all wage and salary jobs (ones which receive W-2’s), fully one-third resulted from gains in construction.”
There is 33% more.
Nope, SD has nothing to worry about in a real estate slowdown…
I wonder how many people are moonlighting in real estate to cover their mortgage.
any comparisons to 1989 ?
wonder what the % of HIC jobs was then
const,mort,re pimpin
all going down hard soon
More new houses, less buyers => even higher inventory!
Article on “exotic” loans and people pushing their finances to the limit:
http://tinyurl.com/rql33
Could someone please explain to me how (or if) this makes any kind of sense?
How is it “income” when you’re going to have to pay it back eventually?
It only converts to income if you sell before the market crashes…
It’s a shame when ordinary people can’t get thru their heads that it’s a LOAN, not INCOME.
Gas, grass or a$$, nobody rides for free.
That about sums it up
This is the reason that California will go into a deep economic contraction. Most of these contruction jobs will disappear with the housing crash.
Additionally, the housing ATM that has been fueling the consumer spending spree will also stop, thus killing the most of these service jobs as noted above.
Bingo OC….Look at the September UCLA Forcast…If housing goes south, its recession time for the Golden State and possibly the country…
I guess he’s never been to Condotino.
Well, there are still plenty of loonies out there (known as greater fools.
The entire article
Isn’t this how the govt makes housing more affordable — getting buyers in to places on zero-down I/O 100% financed ARMS?
Of course- The goal is 100% homeownership. The ends justify the means.
Off topic: Let’s say I have $1M in cash. Instead of paying cash for a $1M house, I buy it with 100% financing, perhaps interest-only for a couple of years. After I live in there for a couple of years, if the house value tanks, what keeps me from just walking away from the house and still keeping all of my cash? Sure, my credit score would be ruined, but who needs good credit when you have cash?
What am I missing?
The difference between what you owe(mortgage) and what your house is now worth may be a bone of contention between you and your lender. And if they right off the debt, it will assigned to you as income.
Under the new BK laws that debt will follow the borrower (read court-ordered restitition, wage garnishment, siezing bank accounts, etc.). Furthermore, the IRS will tax as income anything the bank reports as forgiveness of debt.
to turnoutthelights:
What you said was true, but you needed to take it further.Yes, it will be assigned as income, INCOME TAXABLE BY THE IRS and not discharged by a bankrutpcy filing. The new bankruptcy law is akin to the MAT (min. altern. tax). People don’t have a clue as to the pain waiting in the wings.
That’s going to cause a pound of hurt for a lot of folks
you betcha
What you have suggested is exactly why I think Californians could actually fare better than Arizona or other places where people have fled the California bubble. With no equity trapped in the house, people can just kiss their keys goodbye and turn them in and walk away. On the other hand, if people have cashed out of the California bubble and then sunk that equity into a house say in Arizona, then if home values decline, they won’t be able to roll over that equity into still another place if they decide they want to move again. It may seem irrelevant if you think you’re going to be in a place “forever”, but neighborhoods can and do deteriorate and get ugly as home values decline. Perhaps in such a situation the fact that a number of such people could be “trapped” in their homes could bring some stability to a neighborhood. It’s hard to anticipate exactly how people will react psychologically to such a situation.
new BK law wouldn’t let walk away with your $1MM cash.
And, if interest rates went down and you decided to refi (and pull a little cash out for that new boat of course) you may have a deficiancy judgement and they can come get your cash…
Building permits and replacement value:
http://wallstreetexaminer.com/?itemid=2303
Yup…Thats why the big builders will likely not get burned…They just have to many economies and some have very low land bases in relationship to the recent run up in values…It will be ANYONE who needs to compete WITH the big builders that will see theirheads roll…
would love some 1989 comparisons
% of jobs in RE then vs 2006
% of morts in exotics although arm holders then were getting a good deal- 2006 are screwed
This press release has some detail:
‘ In Alameda and Contra Costa counties, builders took out almost 30 percent more single-family housing permits in January compared to a year ago - a figure that was reversed in Solano County.. In Solano County, single-family permits fell from almost 200 in January a year ago to 100 in January 2006.’
“”Once again, the construction industry was the shining star in 2005, accounting for 13 percent of all new jobs in the state. In both 2004 and 2005, one out of seven new jobs was in construction.”
Hmm….so what happens to the economy is housing goes into the tank??
SEE: 13:05:46 above…
I will enjoy watching the CA economy and bubble go down the tubes. Hope that Hollywood likes that. From the news, Hollywood only has 39% of the people saying that they will vote for him in the re-election. Bad news for the state’s finances. Let’s sell more bonds and mortgage the present to the next generation.
This is bad news for Calif. Those homebuilders need to keep on building. They can still make a profit below current market rates, and California needs more homes to support it’s population. The builders have no obligation to maintain current homeowner’s asset values, and they should feel some obligation to their workers!
Yeah right…
I don’t buy the whole “need more homes to support population” stuff. I have seen plenty of cases of a family of 5+ mexicans living in 1 tiny 1bdrm apt. out here.
Yeah. I have a family of at least 8 mexicans of all ages living next to me. I am not racist. My wife is mexican but I could not imagine having that many people in my apartment.
Sure builderes will build. Even more so now with many of the frims “National & pubic”… You have to keep the stock option pump lubed. But our problem is not lack of supply as the article suggested. Demand fell off the table, as speculators and 2nd home boomers squeezed or tapped out, due to lack of rental income. Just as in England a year earlier…Affordability is non-existant. - Taxes up, utilities up, mortgage payments up…wages not keeping up with sky-rocketing “COLA” (higher food, energy, & health insurance)