California builders aren't building

Posted by: Prashant Gopal on April 25, 2008

builders.jpg
Home production in California is grinding to a halt. The number of single-family home permits dropped 61% to 8,189 during the first quarter of this year compared to the same period in 2007, according to an April 25 report from the California Building Industry Association.

To put it in perspective, 35,329 single-family home permits were issued in california during the 1st quarter of 2005.

These days building new homes makes little sense with so many foreclosed homes competing for buyers. Builders are waiting for the market to turn around, said Alan Nevin, the builder group’s Chief Economist.

“It basically is a case where builders have more or less decided not to build,” Nevin said. “They are almost viewing this as being custom home builders to the extent that they almost won’t start a new home until somebody has bought it.”

Reader Comments

GopalisAnIdiot

April 29, 2008 5:13 AM

Gopal is an idiot because he based his entire story on the opinion of Alan Nevin, a officer in the Builder Industry Association, and his assessement of the housing market. The BIA is a trade organization that represents the big builders. The 61% is a under estimate of the severity of the housing bust. The 8,189 permits issued do not all represent new home construction, rather a mixture of rebuild, extensive remodel, and new home construction. Example: a home destroyed by fire will receive a new building permit that is counted within the 8,189. Gopal is ignorant of this fact which is why he quotes verbatim without researching further the meaning behind the numbers. The reality: real estate is a big bust in California, bigger than Florida, and Nevada combined. The hard-core real estate optimists who persevered hoping prices will recover are now shooting themselves for not getting out sooner. Many flippers are walking especially in Stockton where 1/6 homes are abandon. San Diego County, and Sacramento also are seeing high foreclosure as never imagined. Nevin is trying to paint a bright picture than it is because many big builders still have hundreds of home in inventory gathering dust but accruing construction loan interest.

CriticalThinker

May 7, 2008 2:04 PM

Actually, real estate is not a "big bust" in California. I bought my house in September of 2007 and it's worth more than I bought it. In fact, most of the San Francisco peninsula area is doing fine. Just ask my first-time homebuyer friends who are getting outbid on quality locations, and they're prime borrowers.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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