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CBIA: Calif. Housing to Remain Flat in 2007

California's housing production in 2007 is expected to continue taking a breather as the market slowly returns to historically normal levels after the frenetic pace of the early part of the decade, the California Building Industry Association said today. 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. Nevin noted that 2007 will still be a solid year for production. “Keep this year's forecast in perspective — we are returning to a normal market,� Nevin said. “Producing 155,000 to 170,000 units will be more than any year from 1991 to 2001 and could exceed production levels from 1990 and 2002 as well.� Nevin expects production will be especially low in the first quarter as builders finish selling excess inventory, and expects construction to pick up later in the year. Nevin emphasized that the demand for the homes on the market today is not the same as the state's chronic need for new housing to accommodate its growing population. “We need to be building about 240,000 new homes, condos and apartments a year to meet the need for housing. The problem is that we need new homes in all price ranges, and given the ever-rising fees and constraints on housing, it's all but impossible to meet the need in the entry-level market,� he said.
In his forecast, Nevin projects that single-family production statewide should be between 110,000-120,000 units, compared to about 110,000 single-family housing starts in 2006, and 155,000 in 2005. Multifamily construction, particularly condominiums, is expected to be on par with 2006, with starts projected between 45,000 and 55,000, compared to 58,000 in 2006. Nevin said that many of the high-rise condo complexes announced in recent years for the state's urban centers will be put on hold until lenders and developers regain confidence in the market. He also forecasts that housing prices will remain soft to stable in most markets. “We are already seeing signs of price stabilization as builders in some markets have sold most of their standing inventory. We expect that trend to accelerate after the first quarter. Because there's still excess inventory, there are still significant concessions, which we expect will drop considerably later in the year. In other words, now is a great time to buy,� Nevin said. Despite a normalizing market, CBIA officials say that it will do little to close the state's large housing gap. They attribute the gap to a variety of factors, including the abuse of environmental laws, constraints on available land, and unnecessary government regulations. “Bureaucratic red tape and unnecessary regulations have hampered the state's ability to plan for the future and develop a framework to address the state's long-term housing needs,� said CBIA Chairman Wes Keusder, a Southern California homebuilder. “Hard-working families are struggling to enter the market with little opportunity to achieve the American dream of owning a home.�

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