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Construction forecast to pick up in 2011

July 29, 2010|By JEFF COLLINS

What recovery?
Turns out that building permits for new homes in Orange County during the first half of the year have risen by a paltry 50 units from the first half of 2009 – which was homebuilding's slowest year since World War II.
The net result of this paltry increase – coupled with a decrease in non-residential building – has been a loss of nearly 10,000 construction jobs in the year ended in June.
But that's in the past. A new forecast projects that Orange County builders will start a home construction surge next year, growing the number of building permits by 51 percent.
In a post filed last week, Register blogger Jonathan Lansner reported that the Los Angeles Economic Development Corp. forecasts that building permits will jump to 3,920 units in Orange County next year, the highest number since 2007.
This year, according to the LAEDC's latest forecast, O.C. builders are expected to receive permits for a 2010 total of 2,600 housing units. That's a 19 percent improvement above last year's highly depressed level.

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Local building permits have fallen 5 out of the past 7 years. Even after next year's increase, 2011 still would be the fourth slowest year in the past 22 years.

"New homebuilding in Orange County appears to have bottomed out in 2009 and will improve this year," the forecast said.

LADEC writes:

"Since peaking in 2000 at 12,367 units, residential permits were down by 82 percent. Land availability is relatively low in Orange County and since 2004, multi-family units have accounted for the majority of residential construction permits issued in the County. Up to that point, Orange County had been considered a stronghold of single-family development.

"However, the trend toward more multi-family residences reversed last year. Multifamily permits plunged by 55 percent to 842 units (39 percent of total housing units) while single-family permits rose by 3 percent to 1,335 units."

Little growth seen

So far, this year homebuilding has been only slightly better than last year's pace.

During the first six months of 2010, residential building permits were up just 4.1 percent from the same period in 2009, according to the Burbank-based Construction Industry Research Board.

Permits were issued for 1,258 units this year so far, compared to 1,208 in the first half of 2009. 

That's due mainly to a drop in construction of apartments and multi-story condo buildings. Single-family permits increased nearly 16 percent this year so far, while multi-family permits fell by more than 11 percent.

The first half of 2010 has been the second-slowest since 1988. Orange County builders averaged 5,400 building permits during the first half of the past 23 years, or at least 4,000 more than this year so far.

Just 267 residential permits were issued in June, 29 percent fewer than in June 2009.

Building permits were issued for 161 single-family homes in June, the second-lowest for any June since 1988.

Permits were issued for 106 multi-family units, the third-lowest for any June since 1988.

Statewide, Permits were pulled for 4,238 total housing units in June, up 19 percent from the same month a year ago.

Still, statewide numbers remain low, said Liz Snow, president and CEO of the California Building Industry Association.

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"The fact remains that we're still hovering around the record-low production levels of the past two years," Snow said. "The industry is still facing an uphill battle in the wake of a stabilizing housing market and high unemployment."

9,900 O.C. construction jobs lost

Orange County lost 9,900 construction jobs in the year ended in June, according to the state Employment Development Dept.

In another post published last week by Lansner, he quoted an EDD report showing that construction firms employed 65,200 people in Orange County -- up 1,100 from May.

But note that this is real estate's prime construction season. O.C. saw 1,390 construction jobs added from May on average since 1990.

While the gain may be good news for the industry, overall its payrolls have 45,200 fewer workers than at the cyclical peak.

In June:

•13,200 worked constructing buildings, down 3,500 in year and off 11,900 since the peak.

•6,700 were employed in heavy construction, down 1,100 in year and off 2,400 since the peak.

•45,300 plied specialty trades, down 5,300 in year and off 30,900 since the peak.

As for all property-related jobs -- from lenders to brokers to janitors to architects -- Orange County had 200,700 in June, down 500 from May, down 14,300 in a year and off 83,600 from the peak.

Is this new home worth $470,000?

Register blogger Erika Chavez writes:

An email from William Lyon, touting a "reduced price" on a brand spanking-new townhome at Ivy, a new neighborhood in the village of Woodbury East.

The two-story townhome includes three bedrooms, 2.5 baths and a garage, with 1,500 square feet of living space.

The unit has a fireplace and upgrades including granite countertops and stainless steel appliances. The price? $469,990.

That doesn't include Mello Roos taxes, which will run about $3,971 per year. Homeowners' dues will be $134 monthly for the Master Association and $175 for the sub-association. Buyers are looking at about $640 per month on top of principal, interest and property taxes.

Despite these extra costs, the fledgling communities of Woodbury and Woodbury East have proved popular with home buyers.

More than 400 new homes there went under contract in the first 99 days of sales. By June 24th, four of those developments had sold out.

So, is $470,000 for a new home a good deal?