California Homebuilding to Continue Strong in 2003, But Production Remains Short of Need Says CBIA.

Business/News Editors

SACRAMENTO, Calif.--(BUSINESS WIRE)--Jan. 8, 2003

The new year should see the largest number of housing starts in California in more than a decade, with Southern California showing particularly strong growth, according to two economic forecasts.

At the same time, however, new home production will continue to fall far short of the state's housing needs, worsening an already-serious housing shortage and a critical housing affordability crisis, said California Building Industry Association's Chief Executive Officer.

"Given the need for additional housing for California's growing population, and especially given the economic benefits of new home construction, the forecast for continued growth in housing starts is good news for our industry and for the state as a whole," said CBIA CEO Robert Rivinius. "But despite a landmark reform of the construction dispute process last year, state policymakers need to do more to encourage housing production and to remove the obstacles that make new homes far more expensive than they have to be."

The Construction Industry Research Board forecasts 170,000 new homes and apartments will be built in 2003, a 3.7 percent increase from 2002. The Burbank-based organization's research director, Ben Bartolotto, said residential construction during the new year will build on strong growth in the multi-family sector during the second half of 2002. CIRB forecasts 124,000 single-family homes will be built this year, up 2.9 percent from 2002, while 46,000 multi-family units will be constructed, up 5.7 percent from the previous year.

The 170,000 homes and apartments would be the most built in the Golden State since 1989 and would be twice as many as built during the early 1990s, when housing production plummeted to around 85,000 units in 1993 and 1995.

A separate forecast, by CBIA's sister organization, the National Association of Home Builders, projects a 3.3 percent increase in new home construction in 2003. The study's authors, Chief Economist David F. Seiders and economist Stan Duobinis, point out that the housing market has been an exception to an overall sluggish economy.

"One of the bright spots in the California economy is the housing market," the study said. "This is contrary the situation nationally, where total housing starts are expected to decline by 3.4 percent this year."

The NAHB forecast, prepared for CBIA, projects strong growth in coastal counties, particularly in Southern California, where the economy is strengthening faster than it is in the San Francisco Bay Area. NAHB projects housing starts to increase by 21.8 percent in Ventura County, 15.8 percent in San Diego County, 11.9 percent in Orange County, and 10.2 percent in Los Angeles County.

(The NAHB metro forecast for 2003-04 is downloadable as a PDF file at www.cbia.org.)

NAHB also forecasts a 22 percent increase in new housing construction in San Francisco, driven entirely by a surge in multi-family housing. Housing starts in the rest of the Bay Area are projected to begin rebounding as well, climbing by 5.7 percent in the East Bay and 8.4 percent in the Silicon Valley, with the increases largely fueled by new apartment construction.

The NAHB outlook also sees some retrenching in the state's two largest growth areas, the Inland Empire and the Sacramento region, where housing production is expected to decrease by 3.2 percent and 5.3 percent respectively.

Despite the fact that an estimated 164,000 homes and apartments were built in 2002 -- the largest number since 1990 -- Rivinius noted that according to the state Department of Finance, nearly 230,000 new housing units have been needed each year during the past 12 years due to population growth, job creation and household formation.

"This ongoing housing deficit has helped make California housing the least affordable in the nation. And if that isn't enough of a reason to increase housing production, a study released last month by the Sacramento Regional Research Institute discovered that homebuilding contributes $40 billion a year to the state's economy and creates about 359,000 jobs statewide. The entire housing sector contributes more than $257 billion a year and generates 821,000 jobs. Housing has helped prop up the state's economy for the past two years, and could help even more if production matched the need," he said.

(The entire report is available for downloading as a Word file at www.cbia.org as well.)

Rivinius said steps needed to improve the housing situation include making sufficient land available for new housing in the places where it's needed, reforming the state's environmental laws to reduce housing opponents' ability to block projects for years, and encouraging higher-density housing, particularly in urban areas.

The California Building Industry Association is a statewide trade association representing nearly 6,000 businesses -- homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. According to a recent study, homebuilding generates approximately $40 billion a year to the California economy and creates an estimated 359,000 jobs statewide. More information about CBIA is available on its Web site, www.cbia.org.