California homebuilding for 2009 was down 80% from the peak in 2005, dragging with it the number of jobs resulting from residential construction — which is down 84% over the same four-year period, as reported by the California Homebuilding Foundation and Center for Strategic Economic Research.
The California homebuilding industry in the boom year of 2005 provided nearly 500,000 jobs. In 2009, the end-of-year number lingered around 77,000. Single family residence (SFR) permits issued in 2005 totaled 155,322, while only 25,454 permits were taken out in 2009. Even fewer will be issued in 2010.
first tuesday take: The current drop in new homebuilding below normal annual levels (normal is 70,000 to 75,000) is a direct consequence of the premature construction of all types of improvements in California during the embarrassingly flush years of the Millennium Boom. In 2005, the number of new units built spiked to roughly 155,000 (as also occurred in equally grand quantities in each of the four years during the late 1980s when Baby Boomers were at the height of their household formations). It then sharply dropped to an annual rate of 25,000 in 2010 at the genesis of the Great Recession for lack of users and super-willing mortgage lenders.
The industry pre-built homes which will not be needed until three to five years from now. Today, builders must wait until the vacant homes and coming real estate owned (REO) properties are finally occupied by users — homeowners and those buy-to-let investors who find tenants. Construction laborers must also wait, and like builders, their earnings for the next several years were brought forward and received (as overtime) three to five years prematurely. Hopefully they saved the excessive earnings to spend them during the coming years when the construction work should have taken place.
Currently, the number of units started in the months of 2010 languishes around 2,000 monthly, with this year’s first tuesday forecast at 24,000 total (it was at 28,000 in January 2010). [For more information regarding building of SFRs in California, see the August 2010 first tuesday chart, CA single- and multi-family housing starts.]
California needs to experience about three years of significant job increases, around 400,000 additional jobs annually, to start a recovery of home sales volume. Until then, the housing market will remain engorged with too many sellers (thus, too many properties) and not enough buyers, willing or otherwise. Members of the construction diaspora would be well-advised to refrain from homebuilding and seek retraining and employment in other professions, as are 50% (expiration rate) of sales agents licensed in California. The likelihood of increased homebuilding activity similar to that of the heady years of 1988 and 2005 in the next three to four years is realistically dismal.
A spurt in homebuilding will take place in the 2017-2018 period, but nothing sustainable like the late 1980s when the Baby Boomers roamed to the suburbs.
Re: “State’s home builders report major shrinkage” from the Sacramento Bee