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California New-Home Market Continued at a Crawl in January, says CBIA
Association says recent sales that home buyer tax credits spurred may cause January to be bottom of cycle.
News Release
March 16, 2009
HousingZone
SACRAMENTO -– Clearly demonstrating the need for the state and federal tax credits that were enacted in February, the pace of homClick here for a PDF table listing sales and prices for all major metro arease sales at California new-home communities continued to crawl during January, the California Building Industry Association reported today. (Click here for a PDF table listing sales and prices for all major metro areas.)Robert Rivinius, CBIA’s President and CEO, said anecdotal reports for the first two weeks of March -- after the $10,000 state tax credit for the purchase of a newly built home went into effect -- indicate a jump in sales, and said he hopes the dismal sales figures from January mark the bottom of the current housing cycle.
The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that January sales in new-home communities of 10 units or more were 64 percent below January 2008, slightly worse than the 59 percent year-over-year decline reported in December.
In January, 1,355 new homes and condominiums were sold in the subdivisions tracked by Costa Mesa-based HWMI, compared to 3,773 in January 2008. Sales of single-family homes were down by 63 percent, while sales of townhomes and “plexes” -- duplexes, triplexes, etc. -- were down 55 percent and sales of condominiums were off by 72 percent.
Compared with the same period last year, the median base price of homes sold dropped by 11 percent.
Non-seasonally adjusted total new-home sales were 21 percent higher than levels seen in December 2008, which is not unusual as new-home sales tend to pick up a bit in January after the December holidays. A year earlier, this month-to-month increase was 29 percent, so this year’s jump was weaker.
Median base prices of units sold statewide were 7 percent higher than in December, but with the change in volume and seasonality issues, this is likely an indicator of a shift in the price mix of units sold more so than any actual increases in price by homebuilders, said Jonathan Dienhart, Director of Published Research for HWMI. Dienhart added that with sales volume so meager, month-to-month changes in the median base price of homes sold can be volatile.
“January figures were about what we expected, which is a continuation of a very weak sales pace,” Dienhart said. “Conditions remain poor, but the sales trends suggest we may be closer to finding a floor in this market.”
Rivinius said the Association is hopeful that the combination of tax credits enacted in February will finally pull the state’s homebuilding industry out of a three-year-long tailspin.
As part of the state budget agreement last month, the Legislature enacted a $10,000 temporary tax credit for purchasers of new homes that closed escrow between March 1 and March 2010, or when the $100 million allocated for the credit runs out, whichever comes first.
In addition, Congress enacted an $8,000 tax credit for many moderate-income first-time homebuyers, meaning buyers in lower-cost parts of the state could potentially take advantage of both credits.
“The state tax credit is modeled after a successful federal effort in the 1970s that helped end a housing recession and jumpstart the industry,” Rivinius said. “We’re hopeful that it has the same effect today as well, especially since housing is such an important part of the state’s economy and the state’s economy really needs homebuilding to improve.”
In just three years, he noted that production fell from 209,000 in 2005 to 65,000 in 2008 – the lowest level since accurate statewide records began being kept in 1954. Jobs generated by homebuilding fell from about 486,000 to about 123,000 during the same time period, while the total economic impact of the industry dropped from almost $68 billion in 2005 to a little over $23 billion in 2008.
© 2009, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.
