Residential Construction Sags in O.C.
Residential construction in Orange County has fallen to the lowest level since the housing industry depression of 1982.
According to figures released Monday by the Construction Industry Research Board, local builders--saddled with a costly backlog of homes they can’t sell--obtained permits from local governments for only 488 housing units in August. That is 61% fewer units than in August, 1989, which already was a slow year in county building circles.
And August’s steep drop in permit activity followed a similar decline in July, when builders pulled permits for only 569 units--down from 1,447 a year earlier.
The weak July-August figures underscore what many in the industry are now calling a housing recession in once-booming Orange County.
They also indicate “that we are evolving a tremendous product shortage that ultimately will set off another round of housing price inflation,” said Sanford Goodkin, a housing industry analyst with KPMG Peat Marwick’s Goodkin Real Estate Consulting Group in San Diego.
Goodkin said Monday that he is sticking with his prediction of last January that the housing slump will last about two years.
In all, the county and 28 of its cities issued permits for 8,671 residential units in the first eight months of the year, down 25% from the first eight months of 1989 and 47% from the same period of 1986, the peak year of the county’s most recent housing boom.
The monthly permit figures, compiled by the industry research group in Burbank, show that August’s total in Orange County included permits for only 115 single-family homes, the lowest number since the board began tracking monthly totals by housing type in 1986.
The permits are issued by 28 cities and by the county for unincorporated areas, including much of the South County, traditionally a major housing market.
In August, 10 cities did not issue single-family permits and 14 cities issued no multiple-family permits. One-fourth of the cities in the county issued no permits at all, including Mission Viejo and Fountain Valley.
For the first eight months of the year, builders obtained permits for only 2,504 single-family homes in the county--down 58% from 5,922 in the first eight months of 1989.
At the same time, the number of multiple-family units for which permits were issued increased 9% to 6,167 units from 5,670. The research board includes apartments and owner-occupied condominiums and town homes in its multiple-family category. There is no separate tally of rental units.
“The builders that I talk to say we are in a recession,” said Alfred Gobar, a housing consultant in Brea. “The economists say we are not having a full-fledged economic recession, so what this shows is that building has slowed way down because people are uneasy and because prices are way too high, so the buyers are waiting.”
And 1990 is shaping up as the first year since the research board began tracking Orange County permits in 1967 that the number of multiple-family units will be more than double the single-family total.
Part of the reason is that much of the remaining raw land in the county is in hilly areas and building town homes and other so-called common-wall units enables builders to consolidate units on the available flat land without the huge expense of tearing down hills and filling canyons.
But Gobar said the shift by county builders toward multiple-family housing also “is a manifestation that single-family prices are just too high and that there are a lot of unsold homes out there.”
HOUSING PERMITS IN ORANGE COUNTY
As the housing market has slumped, new construction has dropped precipitously, as reflected in the permits issued for new units.
July 1988: 4,401
Aug. 1990: 488
1988 Total: 23,455
1989 Total: 16,637
Source: Construction Industry Research Board
