Investment propertyCalifornia Still in Housing Hole
California"s home builders will produce more houses this year and next than they have at any time in nearly 15 years. But it still won"t be enough to make up for a shortage of new construction that has persisted since the 1990s or the demand that"s coming in the future.
The California Industry Research Board expects new construction to reach 180,000 units this year, the most since 1989, and perhaps as many as 186,000 houses and apartments in 2004.
Nevertheless, the California Building Industry Association says this year"s output is 50,000 houses and apartments shy of the number needed to keep pace with the Golden State"s ever-increasing population.
"Despite all our problems, California is a great place to live and work," said CBIA President Harry Elliott. "And it will continue to grow, like it or not."
Robert Rivinius, chief executive officer of the 6,000-member trade association, put the total cumulative housing deficit in his state at close to 1 million units, and warned that it is continuing to grow.
"While the housing starts data are good news for the homebuilding industry and the state"s economy," Rivinius said at the Pacific Coast Builders Conference in San Francisco recently, "it cannot be overemphasized that we"re still not building enough housing."
Through the ‘90s, annual housing production in the state was running at an abbreviated clip of 80,000-100,000 units a year.
Elliott, a builder in Folsom, said houses can"t be built fast enough or cheap enough to keep up with the need.
"If we build it, customers will come," Elliott said at a press conference kicking off the conference, the largest regional building industry trade show in the country.
But because of "ever-increasing fees, ever-increasing delays and ever-increasing shortages of land we"re allowed to build on," the median price of a new house increased nearly 15 percent last year alone in the Golden State to $364,000, he said.
"It"s really amazing that so many officials seem to think they can increase a builder"s costs by $40,000 and that none of that will be passed on to the home buyer," he told reporters.
Elliott said he is particularly perplexed by "dream killer" lawmakers who write and vote for bill after bill that would drive up the cost of housing, especially when the sector is so important to the state"s sagging economy.
At the current pace, housing creates about 800,000 jobs and pumps $50 billion-$60 billion a year into circulation, Rivinius estimated.
CBIA counts more than a dozen "really bad bills" that it is working to defeat.
Even the president of the National Association of Home Builders addressed the plight of buyers and builders in the state, saying that too many are being blocked from taking advantage of the lowest mortgage rates in more than 40 years.
"California has suffered for years and now in no exception," said Kent Conine, a builder-developer from Dallas. "Even at record low rates, when a building lot costs $120,000, building affordable housing is out of the question."
Nationally, NAHB economists are in the process of revising their forecasts upward because loan rates have remained low for longer than expected.
"Builder confidence is high, builder optimism is high," Conine reported. "Our ability to put product on the ground and our ability to sell it is quite strong."
NAHB"s outlook for California, conducted for its largest state affiliate, expects starts to rise 6 percent overall in 2003 – 5.8 percent for single-family houses and 6.4 percent for multi-family properties.
But the Burbank-based construction research board is even more bullish, projecting a 7.3 percent jump in production this year and a smaller 3.3 percent increase next year.
Even so, though, Mr. Rivinius said it "will take a long time to make up" the state"s housing deficit.