Single Family Starts PLUNGE

From the Central Valley Business Times website : Bakersfield DOWN over 50%

Single-family housing starts plunge 37 percent

California builders started 37.7 percent fewer single-family homes in November 2006 than they did a year earlier, according to figures released Tuesday by the California Building Industry Association.

Single-family starts were sharply lower across most of the Central Valley with only the Yuba City-Marysville metropolitan area seeing a gain. It posted a 24.6 percent year-over-year increase.

While comparisons to November 2005 were almost uniformly down, there were some metro areas that saw increases over October 2006 numbers, the CBIA says.

Homebuilders’ continuing efforts to reduce their standing inventory and the Thanksgiving holiday are cited by the CBIA as reasons for the slump.

When multi-family housing starts are included in the mix, overall housing production dropped by 9 percent in November compared to October and by almost 34 percent when compared to November 2005, the California Building Industry Association says.

In November, permits were pulled for 5,989 single-family homes statewide, down 3 percent from the previous month and down 38 percent from November 2005, while multifamily housing starts — condos and apartments — totaled 3,723, down 17 percent from the previous month and down 26 percent from November 2005.

In the Central Valley, most markets saw sharp declines in single-family housing starts in November, compared to a year earlier:
• Bakersfield, down 51.4 percent
• Chico, down 48.5 percent
• Fresno, down 61.6 percent
• Hanford, down 13.2 percent
• Madera, down 64.1 percent
• Merced, down 70.2 percent
• Modesto, down 43.8 percent
• Sacramento, down 42.1 percent
• Stockton, down 3.3 percent
• Visalia-Porterville, down 4.2 percent
• Yuba City-Marysville, up 24.6 percent

"Central Valley has two of the nation’s ten least affordable places to buy a home"

From the Centrall Valley Business Times:

The Central Valley has two of the nation’s ten least affordable places to buy a home, according to figures released Thursday by the California Building Industry Association.

Merced ranks as the country’s fifth least affordable area and Modesto comes in at tenth, the CBIA says.

California has nine of the top ten rankings for the fourth quarter of 2006, joined only by the New York City metro area.

Stockton is ranked 13th nationally. Other Central Valley cities and their national housing affordability rankings are:

• Madera, 15th (tied with San Francisco)
• Fresno, 17th
• Sacramento, 16th
• Hanford-Corcoran, 23rd
• Yuba City, 24th
• Visalia-Porterville, 27th
• Bakersfield, 31st
• Chico, 52nd

Affordability is still the issue

From the Central Valley Business Times:

Despite foreclosure rates that are among the highest in the nation, parts of the Central Valley have some of the least affordable housing in all 50 states, according to a report Thursday from the California Building Industry Association.

Affordability in most California markets actually declined from the first quarter of the year to the second quarter, the association says.

Virtually every metropolitan area in the Central Valley is among the nation’s 30 least affordable areas, says the report.

Central Valley seen as stable

Central Valley Business Times has a very rosy forecast from CBIA. I will review at year end to see how close they were:

California’s housing production in 2007 is expected to continue “taking a breather” from the pace set in 2005 and 2004, the California Building Industry Association says.

The new home market will slowly return to what the CBIA says are historically normal levels.

CBIA Chief Economist Alan Nevin forecasts that housing starts for single-family homes, condominiums, and apartments should total between 155,000 and 170,000 this year, about the same or slightly lower than in 2006.

He says it will be a “perfectly tolerable year” for builders.

That’s well short of the 220,000 new housing units the state says are needed to meet population growth, according to the CBIA.

“I see a nice stable market, certainly not anything like the craziness of 2005,” Mr. Nevin says of the Central Valley north of Bakersfield.

“But the market is growing. I look at places like Modesto and Merced and I see a stable growth there because the employment base is growing,” he says. “So you’ll see a nice steady type of market in the northern Central Valley.”

Valley Developers(speculators) abandoning projects

I recall a conversation I had, in August 2005, with the head of a local commercial real estate brokerage who claimed to me that these developers (speculators) who were paying $100,000 to $150,000 per acre for land (to build homes)were going to make out "big time" on this boom.

He claimed that "we had another 7-10 years more of this boom, before things leveled off." Turns out this guy was nothing more than a slick talking salesman who would say anything to make a commission.

Now the tide is going out and we get to see who is swimming naked.

From the Bakersfield Californian BY GRETCHEN WENNER:

A major housing development southwest of Bakersfield is dead, a victim of the wheezing housing market.

The Flying Seven Ranch was slated to put more than 9,000 homes and apartments south of Panama Lane on four square miles of farmland owned by the Destefani family. Flying Seven developers now say their project is kaput because of drooping demand.

That project's demise may also impact plans for the Gateway project of nearly 16,500 more units immediately to the south of Flying Seven. A gap created by Flying Seven's pullout could hobble Gateway's plans for annexation into Bakersfield.

"Things were going great guns," said Marc Gauthier, the city's principal planner, "then got slammed into neutral."

The following month, developers of the McAllister Ranch project on the north side of Panama Lane got a two-year extension for 274 homes on a 582-acre patch there.

The 6,000-home McAllister Ranch community is moving ahead, though at a slower pace than developer SunCal Cos. predicted two years ago. Then, it said residents might move in at the end of 2006. SunCal took over the long-dormant project in April 2005 after previous developers dropped out in 1993.

These days, a golf course designed by Greg Norman boasts tidy greens, but the rest of the 2,070-acre project rises not much higher than the curb-and-gutter stage.

Fresno Bee (hat tip Lander).

“A real estate mystery lingers in southeast Fresno: Why would a developer build two dozen houses, sell only two and then disappear?”

“Few cars visit this ghost tract south of Butler Avenue, known as Ashwood Park. Weeds choke many lots. The model home complex is closed. There are no real estate signs in the yards, and no phone numbers posted anywhere. Just placards in the windows that read ‘available.’”

“‘It’s very quiet and peaceful,’ said Pao Ly, one of two home buyers who moved in before the developer, Lafferty Homes of San Ramon, vanished in March. He suspects the surrounding houses eventually will sell for less than the $450,000 he paid for his 2,900-square-foot home, and would like to renegotiate the deal — if he can figure out who to call.”

“Experts say the developer likely turned the tract over to lenders because it couldn’t sell houses fast enough to cover debt payments — much as some troubled home buyers walk away from a house they cannot afford and cannot sell.”

“‘The odds are that there was a large loan on the land and the builder could not afford to carry the land,’ said Alan Nevin, economist for the California Building Industry Association.”

“Lafferty Homes may have priced the houses too high for the area, some real estate observers said.”

1) Builder reality check 2)2008 Predictions 3)Foreclocures reach a new record

1) Builder reality check:

Before we review the rosy BS forecast from the California Building group (aka building spin machine), lets look back at their 2007 forecast which turned out to be nothing but hot air :

The new home market will slowly return to what the CBIA says are historically normal levels.CBIA Chief Economist Alan Nevin forecasts that housing starts for single-family homes, condominiums, and apartments should total between 155,000 and 170,000 this year, about the same or slightly lower than in 2006.

He says it will be a “perfectly tolerable year” for builders.

That’s well short of the 220,000 new housing units the state says are needed to meet population growth, according to the CBIA.“I see a nice stable market, certainly not anything like the craziness of 2005,” Mr. Nevin says of the Central Valley north of Bakersfield.“But the market is growing. I look at places like Modesto and Merced and I see a stable growth there because the employment base is growing,” he says. “So you’ll see a nice steady type of market in the northern Central Valley.”

Do I need to go back and look at what really happened? Do we need 250 links to prove how wrong this was? Why does the media take this mind numbing drivel as anything except the load of crap that it is!

Now we get to this years forecast:

“By mid-2008 the housing industry will show signs of growth,” says Mr. Nevin. “Continued population growth, a reduction of existing inventory and a return to normalcy in the credit markets are a recipe for a more positive 2008. As a result, we are projecting a slight increase in new home sales over last year.”

We project that the home building business will improve modestly in 2008 as smaller homes are once again produced. We project 17,000 units of single-family housing for 2008 in the San Joaquin Valley,” he says.

Multifamily production has traditionally been negligible in the San Joaquin Valley, typically accounting for no more than 10 percent of output. “We see no change in that picture and project 3,000 units of multifamily units permitted in 2008,” Mr. Nevin says.

Statewide, Mr. Nevin predicts that new-home sales will increase in the second half of 2008, leading to the construction of more than 80,000 new single-family homes this year, up from about 70,000 last year. He also expects production of condominiums, apartments and town homes to increase to about 46,700, compared to about 44,000 in 2007.

2) 2008 Predictions (hat tip Lander):

Bakersfield Californian:

I don't think it's as lousy as everyone puts on," said Ray Karpe, the immediate past president of the Bakersfield Association of Realtors, a local trade group....

And, he predicted, home prices will reverse direction, and start an incremental climb. "I think home prices, home values, will creep up," Karpe said.

Based on what? The need to make a sale?

In the next 60 days the inventory levels will start to increase, credit which is already tight will get tighter and the foreclosure levels will continue to rise on a year over year basis. Also, what is wrong with declining home values - this will make them more affordable and will be better in the long run for a sustained period of economic growth and not a boom/boom cycle where the outcome is mostly a losing game.


3) Foreclosure reach an new record:

From the Bakersfield Californian: (be sure to check the PDF files for the detailed charts)

FORECLOSURES

Foreclosed properties also hit annual and monthly highs. A total 3,007 properties foreclosed last year compared to 408 in 2006. The next closest year was 1998’s total of 2,683. December’s count of 421 foreclosed properties set a new monthly record and continued a quickening pace since the beginning of the year, when 103 foreclosures were recorded.