North Coast construction activity remained flat for the first three months of the year, and some industry leaders took solace that at least things aren’t getting worse.
Contractors in Sonoma, Lake and Mendocino counties took out building permits worth $70 million in the first quarter of 2011, according to the Construction Industry Research Board, an industry-funded research center in Burbank. The amount, which includes all residential, commercial and other private projects, was down 1 percent from a year ago.
North Coast builders pulled permits to construct 123 single-family homes during the first quarter, up from 85 a year ago. But five years ago, permits totaled 519 for the same period.
For Sonoma County, 98 new house permits were issued for the quarter, compared to 54 a year ago.
Building group leaders said the numbers suggest the industry has hit bottom after three years of pain.
“At this point even flat looks good,” quipped Keith Woods, chief executive officer for the North Coast Builders Exchange, a Santa Rosa trade group. “This is an industry that has been bleeding for so many years.”
Across California, contractors received permits in the first quarter for nearly $5.9 billion worth of construction, up almost 5 percent from a year ago.
The research board is forecasting 55,000 new housing units this year, up 22 percent from 2010. Even so, analysts predicted 2011 will join the previous three years as the worst on record.
“We have nowhere to go but up,” said Bob Glover, executive director of the Building Industry Association of the Bay Area.
Builders, he said, are cautiously optimistic of better times ahead as the economy rebounds.
“It will be a slow, slow climb,” Glover said.
From 1997 to 2006, builders took out permits to construct from 1,900 to 3,000 new homes every year in Sonoma County. But during the last three years, the number of permits never exceeded 600 annually.
Builders repeatedly have said they can’t build houses for as low as the selling prices of foreclosure homes and other distressed properties.
However, a few builders continue to construct new homes.
DeNova Homes of Concord held a grand opening Saturday for its 96-unit Southgate development in west Petaluma. Ten homes are under construction and seven models are finished and furnished, said Lori Sanson, an executive vice president. Homes start at $399,000.
The large number of foreclosures will continue to challenge builders, Sanson said. But many buyers prefer new homes “for that sense of security” that comes with a home warranty, she said. Buyers also prefer the ability to customize the new house.
– Robert Digitale
John Hudson
All building activity that accommodates increased population is bad. California is already grossly overpopulated. That’s why we have the water, traffic, pollution, sewage disposal, infrastructure, and budget problems, not to mention the loss of natural beauty and access to public higher education. Activity that rebuilds, improves, or repairs homes and infrastructure that is already here are good. But if population growth brought prosperity, California would have gone into this recession with the lowest unemployment rate instead of the second highest.
May 4th, 2011 6:09 am
CJ Holmes
It is not only the competition of cheaper foreclosures that are hurting builders.
Builders are continuing to hurt themselves by doing everything possible to cut out the buyers’ agents, both to increase the builder’s profits and to manipulate buyers easier.
Bad news travels like the wind, and by now I doubt any agent in Sonoma county doesn’t know how a builder demanded the buyer’s agent pay for all the buyer’s concessions out of the agent’s commission. This is one way builders shoot themselves in the foot.
Another builder policy is to immediately inform buyers that show up without an agent, that the house will cost them more if they use an “outside” agent. So most buyers use the builder’s agent, not understanding the lack of representation may cost them far more in the long run.
Builders also demand offers be written on the builder’s contract, which conveniently sidestep many buyer protections written into standard CAR contracts. Typical builder terms may include insisting the buyer use the builder’s lender, and that the buyer give the 3% earnest deposit directly to the builder, without recourse.
Considering how many builders have gone bankrupt these days, it’s hard to imagine this industry even being allowed to use these contracts, or that any sane buyer would ever agree to give money directly to a builder.
In my opinion, Builders should revisit their business model with an eye to partnering with agents instead of pushing them away, and recognize they need to provide more buyer protections.
May 19th, 2011 12:07 pm