California New Home Market Stays Cold in February, CBIA Announces

Pace of decline slows, leading to glimmer of hope that bottom of market is near

SACRAMENTO – The pace of home sales at California new-home communities continued to remain sluggish in February, 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 February were 57 percent below February 2007. While a significant decline, the drop is a small improvement from the year-over-year decline of over 62% in January. During February, 3,191 homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 7,458 in February 2007. Sales of single family homes dropped by 52 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 48 percent and sales of condominiums were down 79 percent.

Compared with the same period last year, the median base price of homes sold dropped by 14% percent.

Non-seasonally adjusted total new home sales were 19% higher than levels seen in January, which is typical as February tends to mark the beginning of the spring selling season. Median base sales prices statewide were 1.3% lower than in January.

Jonathan Dienhart, Director of Published Research for HWMI, notes the housing market continues to face challenges this year.

“Broadening economic declines make a housing market recovery that much more difficult,” Dienhart said. “However, for the second consecutive month the year-over-year decline in sales has shrunk slightly. Ideally this trend will continue in coming months and give us a better indication that the worst is finally behind us.”

Dienhart also suggests that the recovery process is going to be lengthy.

“With a shrinking economy and job losses increasing, a recovery in housing demand is likely to be slow and gradual. In the short term, builders have to continue to concentrate on reducing inventory and not adding to the oversupply of units on the market,” he said.

Robert Rivinius, CBIA’s President and CEO, said while any glimmer of hope is encouraging, the fact remains that policy makers need to quickly take action to nurse that spark into a full-fledged housing recovery.

“Here in Sacramento, we once again call on lawmakers to quickly pass the two bills that are at the heart of our economic stimulus package – SB 1185, which would give builders more time to complete approved developments and allow the industry to quickly respond when the market improves, and AB 2604, which would allow impact fees to be paid when the home sells or is ready for occupancy instead of at the beginning of construction,” Rivinius said.

“And in Washington, D.C., we urge Congress to pass an effective follow-up housing stimulus package that includes a permanent increase in the FHA loan limits to $729,000 and a tax credit for buying a new home. We were encouraged that the tax credit is included in the House Ways and Means Committee mark up and will continue working with the National Association of Home Builders, to persuade Congress to take quick action to jump-start the housing industry.”

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The California Building Industry Association is a statewide trade association representing nearly 7,000 businesses – homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. A recent study determined that homebuilding generates approximately $68 billion a year to the California economy and creates an estimated 487,000 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.