Los Gatos Weekly-Times

Homes

The Real Deal

Housing starts continue to climb

Recent information released by the California Building Industry Association reveals housing production in the state continues to increase, and production is on target to reach expected levels for the year. In June, building permits were pulled for 12,292 single-family homes statewide, up 2.9 percent from the previous month. It's the fifth straight month-over-month gain in single-family production, according to statistics compiled by the Burbank-based Construction Industry Research Board.

Multifamily housing starts--condos and apartments--totaled 6,883, up 97.6 percent from the previous month. Overall for the month, builders pulled permits for 19,175 homes and multifamily dwellings, up 24.3 percent from the previous month.

The San Jose-Sunnyvale-Santa Clara metropolitan areas saw a decrease in single-family home starts, but a big jump in building permits for multifamily dwellings. These metropolitan areas saw a 35 percent drop in building permits issued for single-family homes during the month of June compared to the previous month. In June, builders pulled permits for 245 single-family homes, down from 377 in May. Multifamily housing starts, however, increased more than 366 percent, from 95 in May to 443 in June.

Layne Marceau, 2006 CBIA chairman and a Bay Area homebuilder, says housing seems to be returning to a "normal" market, where buyers have choices and sellers have to price their properties right in order to sell them. Because of the number of homes on the market, now is a great time to buy, he said.

"The market is much different than it was a year ago," Marceau said. "Last year, we had waiting lists for homes before we even broke ground, but this year it's a different story. Inventory is moving a little slower, but that makes it a great time for buyers, as builders are getting creative and offering incentives to attract them."

David Hunt, a Realtor with Coldwell Banker and director of the Silicon Valley Association of Realtors, said, "The market is changing, and buyers are waiting. They're becoming more selective; they feel prices are going to be going down, so they are waiting. Then there are sellers who feel they are going to miss the market, so more are putting their homes for sale, which in turn, increases inventory."

Whether it's to buy a new or existing home, it's still a good time to buy, according to Hunt, who also serves as chair of the Realtor association's Housing Opportunities Committee. Hunt said, "Interest rates are still relatively low. They are inching upward, but continue to fluctuate. Now is still a good time to buy."

CBIA chief economist Alan Nevin said for the remainder of 2006, new-home construction in California is expected to continue cooling off from 2005's strong production levels, as the housing market adjusts from a superheated state to more normal conditions.

Nevin predicted multifamily construction will remain extremely strong in most markets and expects starts to total between 45,000 and 55,000 units--about the same as last year's levels--but single-family starts are expected to drop to between 125,000 and 135,000, compared to nearly 155,000 in 2005.

"Although starts for the year are down 12 percent compared to the first six months of 2005, California builders are on target to begin construction on between 170,000 and 180,000 units for 2006," Nevin said. "Statewide, the single-family permit count is down almost 20 percent, but that is counterbalanced by an 11 percent increase in multifamily permits."

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to rmeily@silvar.org.