December 2008 another slow month for California new-home sales
Stimulus legislation is badly needed, state builders association reports
The pace of home sales at California new-home communities continued to slow in December following deteriorating credit conditions in the closing months of 2008, the California Building Industry Association reported today. CBIA officials urged the Legislature to quickly enact stimulus legislation that the Association believes will help reverse the continued depression in the state’s homebuilding industry.
“Now is the time to enact a meaningful state tax credit and other stimulus legislation being proposed by CBIA, as without it new-home production is all but certain to continue at post-World War II lows for at least another year, dragging down our economy and state and local government budgets,” said Robert Rivinius, CBIA’s President and CEO.
The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that just 1,117 new homes and condominiums were sold in the new-home communities of 10 units or more tracked by Costa Mesa-based HWMI, compared to 2,695 in December 2007. December’s sales were 59 percent below December 2007, only slightly better than the 63 percent decline seen in November.
Sales of single-family homes were down by 55 percent, while sales of townhomes and “plexes” – duplexes, triplexes, etc. – were down 73 percent and sales of condominiums were off by 60 percent. Compared with the same period last year, the median base price of homes sold dropped by 16 percent.
Non-seasonally adjusted total new-home sales were 16 percent lower than November’s levels, which is not unusual as new-home sales trend downward in the closing months of the year. Median base prices of units sold statewide were 6.2 percent lower than in November, but with sales volumes so meager, month-to-month changes in the median base price of homes sold can be extremely volatile.
Jonathan Dienhart, Director of Published Research for HWMI, noted the combination of seasonal trends and dismal demand conditions made December’s figures a new low point.
“December is always slow for new-home sales,” Dienhart said, “but the problems with credit, consumer confidence and plummeting resale values made it an especially bad month. This should be close to the lowest absolute monthly sales number we see during this downturn, but the next couple of months are not likely to be much better.”
Dienhart also pointed out that new homes face stiff competition from the resale market.
“With distressed property sales becoming increasingly prevalent in the resale market, it has the effect of taking market share away from new homes. Until the foreclosure situation stabilizes, it will be very difficult for new-home builders to compete.”
Rivinius agreed that efforts in Washington, D.C., to encourage lenders to work out new terms with homeowners instead of foreclosing on them would be extremely beneficial, but added that the situation is too dire for state lawmakers to wait and see what comes out of proposals at the federal level.
“A similar tax credit enacted by Congress in the mid-1970s helped turn around a deep slump in new-home sales within a matter of months,” he said. “In just the past four years, the drop off in homebuilding has cost the state hundreds of thousands of jobs and tens of billions of dollars in lost economic output. Housing traditionally leads the country out of recessions, and we urge state lawmakers to act quickly in 2009. It is also important for banks to again lend money for viable projects and work with builders who have existing projects.”
About the CBIA:
The California Building Industry Association is a statewide trade association representing thousands of homebuilders, remodelers, subcontractors, architects, engineers, designers, and other industry professionals. More information is available on the Association's Web site, www.cbia.org.
Hanley Wood Market Intelligence is the housing industry’s leading provider of rich data and consulting services on residential real estate development and new-home construction and is a division of Hanley Wood, LLC, the premier media company serving housing and construction. More information is available on the company’s Web site, www.hanleywood.com/hwmi or by calling 1-800-639-3777.
Hanley Wood Market Intelligence (HWMI) collects data from new for-sale production subdivisions of 10 units or more on a monthly basis. HWMI Net Sales represent sales contracts signed during the period indicated minus any reported cancellations. Median and Average Prices are based upon the minimum asking price of the plans sold during the period and do not include the cost of any lot/view premiums or upgrades. Because this data is collected monthly and based upon sales contracts that represent future closings, HWMI data is the most forward-looking data source available for new home information in the state of California.