California New Home Market Close to the Bottom, CBIA Announces
As pace of decline slows, CBIA calls for more stimulus legislation to facilitate quick and seamless recovery
May 15, 2008. SACRAMENTO – While the pace of sales at California new-home communities continued to remain slow in March, year-over-year sales declines are steadily shrinking, adding to mounting evidence that the bottom of the current housing cycle is near, the California Building Industry Association reported today.
The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that new home sales in March were 49 percent below March 2007. While a significant decline, the drop is an improvement from the year-over-year decline of over 57 percent in February. During March, 3,565 homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 6,954 in March 2007. Sales of single-family homes dropped by 44 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 40 percent and sales of condominiums were down 66 percent.
Compared with the same period last year, the median base price of homes sold was down 12 percent. Non-seasonally adjusted total new-home sales were 12 percent higher than levels seen in February, which is typical as March tends to be one of the strongest months of the year for new home sales. Median base sales prices statewide were just 0.5 percent lower than in February. Jonathan Dienhart, Director of Published Research for HWMI, notes the trend in year-over-year sales percentages could indicate the bottom is near. “Last year, new-home sales declined from February to March, bucking typical seasonality trends,” Dienhart said. “This year March sales exceeded those of February, which is the expected direction. Additionally, for the third consecutive month the year-over-year decline in new-home sales has shrunk, suggesting the market may be bottoming out.”
Dienhart also suggested that while 2008 may be the bottom of the housing market, the path to recovery won’t be immediate. “With challenges in the broader economy, the housing market will likely take longer than expected to start recovery,” he said. “A return to more traditional housing demand drivers means we will need job growth and positive economic trends to see substantial improvements for the building industry.” Robert Rivinius, CBIA’s President and CEO, said the statistics should send messages to both prospective homebuyers who have been on the fence for the past 18 months and to policy-makers.
“As the market decline appears to be coming to an end, it is likely that incentives and further price drops will also be coming to an end. And with inventory levels falling and housing starts at their lowest level since World War II, it is also quite possible that as buyers return to the market we will see prices harden quickly. Prospective buyers should take advantage of the buyer’s market while they still can,” Rivinius said. “But to help guarantee that the housing industry rebounds as quickly as possible, creating jobs and higher tax revenues for government, policy-makers need to act quickly to enact reforms that will spur sales and new construction.”
He said Congress needs to pass economic stimulus legislation now being debated that would make permanent higher guaranteed loan limits and creating a temporary tax credit for homebuyers, and that the state Legislature needs to quickly pass CBIA-sponsored legislation to give builders more time to begin construction on already-approved projects and to defer collection of impact fees until a home is sold.
### The California Building Industry Association is a statewide trade association representing nearly 6,700 businesses – homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. A recent study determined that when homebuilding is at healthy levels, the industry generates approximately $60 billion a year to the California economy and creates an estimated 526,000 jobs statewide. More information is available on the Association’s Web site, www.cbia.org. Hanley Wood Market Intelligence is the housing industry’s leading provider of rich data and consulting services on residential real estate development and new-home construction and is a division of Hanley Wood, LLC, the premier media company serving housing and construction. More information is available on the company’s Web site, www.hanleywood.com/hwmi or by calling 1-800-639-3777. Hanley Wood Market Intelligence (HWMI) collects data from new for-sale production subdivisions of 10 units or more on a monthly basis. HWMI Net Sales represent sales contracts signed during the period indicated minus any reported cancellations. Median and Average Prices are based upon the minimum asking price of the plans sold during the period and do not include the cost of any lot/view premiums or upgrades. Because this data is collected monthly and based upon sales contracts that represent future closings, HWMI data is the most forward-looking data source available for new home information in the state of California.
