Building permits tick up, housing still weak

By: ZACH FOX - Staff Writer
Permits in December increased though annual sums still down | Thursday, January 17, 2008 9:31 PM PST ∞

San Diego County building permits increased 50 percent in December from the previous month, but with national data released Thursday showing new home construction took its biggest dive in 27 years, housing specialists said the numbers do not necessarily foretell a housing recovery

Countywide permits for multifamily housing units, or apartments and condominiums, jumped the most, shooting up 66 percent in one month, to 434, according to data by the Construction Industry Research Board. Single-family home permits were up 26 percent, to 216.

Despite the month-to-month increase, yearly totals of all housing permits in the county tumbled 31 percent, to 7,436 from 2006 totals. Single-family home permits fell 26 percent during that time, to 3,508.

Similar housing market softness showed up in a report by the Commerce Department released Thursday. Nationally, new home construction plunged 25 percent from 2006 to an annual rate of 1.4 million new homes, the second-biggest annual decline ever recorded.

Year-over-year, the county's December numbers showed a 93 percent increase in multi-family units but a 31 percent drop in single-family units.

The San Diego County permit increase from November to December could be a result of an artificial jump effected by builders waiting on construction until the soft housing market recovers, said Ben Bartolotto, research director for the Burbank-based industry board.

As builders wait, applications eventually expire and after Jan. 1, the plans would have to meet new building codes, he said.

While the code changes are not significant, meeting them would require a costly redesign, which provided a financial incentive for builders to acquire new building permits in December, said Sherman Harmer, president of the Building Industry Association of San Diego County.

Still, Harmer said the permit increase shows that some areas are relatively unaffected by the housing downturn.

"There are some regions where single-family home demand is still high," he said. "If you look at Carlsbad, prices are stable, buyers are there, and you have a market that has not been dramatically affected like much of the rest of the county."

Bartolotto said the multifamily permit escalation was also a result of a handful of large projects.

But the housing recession shone through unmitigated in the Commerce Department's regional and national data, as construction in the West declined 20 percent from 2006. The Midwest saw the biggest drop, posting a 31 percent fall, while the South saw the smallest, with a 3 percent decrease.

Economists said the weakness showed that the housing correction was getting worse since turmoil hit the financial markets in August, causing lenders to tighten loan standards.

"Builders have finally thrown in the towel," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "This is a precondition for recovery as it will eventually reduce the inventory overhang. But there is a long way to go."

Many economists believe the housing sector will remain weak through this year before starting to stage a rebound in 2009.

The Associated Press contributed to this report. Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.

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