October Credit Crisis Paralyzed California New-Home Market, CBIA Announces
Homebuilders Again Urge Congress, State to Enact Stimulus Packages
CRAMENTO, CA – December 16, 2008 – (RealEstateRama) — The pace of home sales at California new-home communities was extraordinarily bad in October, primarily due to the global credit crisis, the California Building Industry Association reported today. CBIA officials said the extremely low sales rate should prompt quick action by policy makers for actions to help jump-start the critically important homebuilding industry.
“The huge fall-off in home sales in October is yet more proof that the industry is in dire straits and that state and federal stimulus packages are needed to help turn around homebuilding, and with it the larger economy,” said Robert Rivinius, CBIA’s President and CEO. “Housing traditionally is the engine that leads the economy out of recession, but with homebuilding in a depression, there’s little chance the overall recession will begin to improve without tax credits and other incentives to push people off the fence and back into the marketplace.”
The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that new home sales in October were 63 percent below October 2007, representing some of the worst monthly statistics yet seen over the course of the housing downturn.
During October, 1,462 homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 3,949 in October 2007. Sales of single family homes were down by 62 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 64 percent and sales of condominiums were off by 65 percent.
Compared with the same period last year, the median base price of homes sold dropped by 9 percent.
Non-seasonally adjusted total new home sales were 29 percent lower than in September. While it is not unusual for new-home sales to show a slower pace of sales activity in October than in September due to normal seasonality trends, the drop this year was unusually large compared to the 9 percent drop for the same period a year ago.
Median base prices of units sold statewide were 3.5 percent lower than in September, although with sales volumes fluctuating so widely, the trend line representing the median price of homes sold can vary substantially from month to month.
Jonathan Dienhart, Director of Published Research for HWMI, said the health of the economy and the labor market will be key to any recovery in the housing market.
“Stable credit markets and banks are beneficial, but can only do so much when it comes to the housing market. Buyers still need to have good credit, a stable source of income, and in most cases a down payment in order to qualify for a mortgage,” Dienhart said. “Additionally, existing homeowners have little hope of selling their current house quickly if they need to do so in order to purchase a new one, which will create a stranglehold on new home sales until economic conditions improve.”
Rivinius pointed out that housing production this year is by far the lowest since the end of World War II, and that 2009 is shaping up to be equally bad, or even worse. He said a broad coalition of more than 600 member companies and organizations nationwide called Fix Housing First has proposed that Congress and the incoming Obama Administration enact a temporary 10 percent tax credit on the purchase of all primary residences between April 9, 2008, and Dec. 31, 2009.
The credit would be available at the time of closing, making it easier to be used as a down payment, and unlike the $7,500 credit passed earlier this year would not have to be repaid. The amount available for each purchase would be on a sliding scale from $10,000 to $22,000. The proposal also would provide qualified homebuyers with 30-year fixed-rate mortgages at 2.99 percent on contracts closed until June 30, 2009, and 3.99 percent on closings between June 30 and Dec. 31, 2009.
Separately, CBIA is proposing that the California Legislature enact a 5 percent tax credit for purchasers of new single-family homes between Oct. 1, 2008, and Oct. 1, 2009. Berkeley Economic Consulting, a consulting firm, estimates that the proposal would lead to a net state revenue gain of $1.07 billion.
“Because of the sharp drop-off in homebuilding, California has lost nearly 300,000 jobs and $46 billion in economic impact in just the last three years. It’s clear that action is needed, and needed now, to help reignite homebuilding and get the state moving forward again,” Rivinius said.
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The California Building Industry Association is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. 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.
Contact:
Michael Castillo
Communications Specialist
(916) 443-7933 ext. 346
mcastillo (at) cbia (dot) org
