Home construction plummets 53 percent

By: DAVE DOWNEY - Staff Writer | Tuesday, August 28, 2007 1:40 AM PDT ∞

The pace of home building in Riverside County, the epicenter of California's recent housing boom, has slowed to less than half what it was a year ago, a report released Monday by the California Building Industry Association shows.

For the year to date through July, Riverside County and its cities issued permits for 7,444 single-family homes, a steep decline of 53 percent from 15,826 for the same period in 2006, according to statistics compiled by the Construction Industry Research Board. The board is the research arm of the state association.

Building activity in the multifamily market has slowed even more. After taking out permits for 3,216 apartments and condominiums in 2006, home builders have started work on just 1,447 such units this year, statistics show.

"We've been on this trend for a number of months," said Borre Winckel, executive director for the Riverside County Chapter of the Building Industry Association of Southern California. "We've been trending fully 50 percent below last year."

Winckel said area residents can expect that trend to continue through 2008, accompanied by a moderate decline in home values.

Meanwhile, Temecula has bucked the trend so far this year. Single-family housing starts through July totaled 586, up from 439 last year, said Diane Ball, an administrative assistant in the building and safety department. Calls to Murrieta and Lake Elsinore building departments were not returned Monday afternoon.

State association representatives blamed the regional slowdown in part on the turmoil in the mortgage financing business.

With a wave of foreclosures locally and around the country, particularly among buyers who had shaky credit and stretched to get into homes, lenders are tightening qualifications for taking out loans. As a result, families are being priced out of a market that was within their reach -- if only temporarily, through interest-only and adjustable mortgages -- this time last year.

"The down payment is back," said Robert Campbell, a San Diego economist who publishes a newsletter advising people when to invest in real estate.

The industry also blamed the dramatic slowdown on the stalemate in the resale market.

Analysts say many buyers of existing homes are refusing to make purchases unless sellers offer steep discounts, and sellers are refusing to budge on prices, in the hopes of getting what their neighbors did at the height of the boom.

"We have this curious phenomenon, where everybody is waiting for a better opportunity," Winckel said.

Building activity in Riverside County was particularly slow in July. Housing starts for single-family homes were off 66 percent, from 2,022 in July 2006 to 692, according to the Construction Industry Research Board.

The numbers reflect a slowdown throughout California, with biggest declines concentrated in the Inland Empire and Central Valley. Statewide, housing starts for single-family homes are off 35 percent, from 74,740 for the first seven months last year to 48,321. Builders are on a pace to frame about 83,000 houses for the year, well below the range of 110,000 to 120,000 forecasted by the state association in January.

Construction totals likely won't come close to matching the trade group's forecast of 31,000 to 35,000 houses this year in Riverside and San Bernardino counties combined. The counties are on track to reach 21,000.

Winckel said the downturn is concerning because home building accounts for about one-third of Riverside County jobs, either directly through construction or indirectly through sales of appliances, lawn mowers and other items used in the home.

"We are very concerned about the spillover of the woes of the housing market into the general economy," he said.

Winckel said builders also are concerned about their livelihood.

"We're not looking to go from bust to boom again; we're just looking to get back into the business," he said.

Winckel urged potential buyers not to sit on the sidelines, saying they can take advantage of the swelling inventories of for-sale signs in neighborhoods all over the county.

Campbell predicted most buyers won't.

"We're in a hurricane right now. The leading edge of the hurricane is hitting us with full force," he said. "You think people are going to jump back into this market after what's happened the last year and a half? No way."

-- Contact staff writer Dave Downey at (951) 676-4315, Ext. 2623, or ddowney@californian.com.