Single-Family Housing Starts Hold Their Own in May, CBIA Announces

CBIA says state new-home tax credit is generating demand for new homes and construction

SACRAMENTO, CA – June 24, 2009 – (RealEstateRama) — May single-family home starts held their own compared to April, offering additional evidence that the state new-home tax credit is generating demand for new homes and leading to a resumption of job-generating construction, the California Building Industry Association reported today.

“This is very good news,” said Robert Rivinius, CBIA’s President and CEO. Rivinius said builders are responding to the increased traffic and corresponding demand that the tax credit has been producing statewide since it was enacted in March of this year.

“When they enacted the $10,000 tax credit back in February, the Governor and the Legislature weren’t sure it would work,” Rivinius noted. “But as this continued strength in new-home construction shows, the credit is indeed working, and working very well.”

In fact, the Franchise Tax Board – the state agency charged with administering the program – just reported that nearly all of the $100 million that was allocated to the program is gone. Rivinius said the homebuilding industry, in an effort to keep the positive economic momentum going, is working with the Governor and the Legislature to extend the tax credit so that it is able to work the full year for which it was authorized.

“After only four months, the program is nearly out of money, but the tax credit was designed to remain an active economic stimulus until March of next year. We still have eight critical months to go,” he said.

Rivinius said the tax credit is popular among legislators on both sides of the aisle not only because it generates jobs and other economic activity but because it produces critically needed state tax revenues.

“Studies show that building a new home in California generates on average about $16,000 in desperately needed tax revenues to the state treasury,” Rivinius said. “Lawmakers know that and now it’s a matter of determining how to finance the remainder of the program.”

Statistics compiled by the Construction Industry Research Board found that builders pulled permits for 2,203 single-family homes in May, down just 7 percent from April but 40 percent lower than in May 2008. On a seasonally adjusted basis, CIRB reported that May’s figures were down just 1.6 percent compared to April.

Permits for condominiums and apartments fell sharply to just 671 units, down from 1,073 in April and down from 3,333 in May 2008. CIRB noted, however, that multifamily permits tend to be extremely volatile from month to month and that builders began construction on a relatively large number of units in March, which may account for the drop off in April and May.

Because of the decline in multifamily permits, total starts fell to 2,874, compared to 3,448 in April and 6,974 in May 2008.

However, based on the strength in the single-family market, CIRB for the first time this year has adjusted its annual forecast upward this month. The Board now expects single-family housing starts to total 24,900 and total housing starts to be 40,200 for the year.

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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.

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Contact: Michael Castillo
Communications Specialist
(916) 443-7933 ext. 346
mcastillo (at) cbia (dot) org