New Housing Rate Rises in West, Nation : Construction: The surprising April figures raise hopes that real estate markets in Southern California and the rest of the country will continue their rebound.
The pace of new home construction rose a surprising 3.4% in the West and 6.7% nationwide in April from March, the government said Tuesday, raising hopes that real estate markets in Southern California and the rest of the nation will sustain their slow but steady recovery.
Ground was broken on new homes at a seasonally adjusted annual rate of 305,000 units in the West last month, the Commerce Department said, up from the 295,000-unit rate set in March and 15.5% greater than a year ago. Housing starts nationwide reached a 1.21-million annual rate, the biggest month-to-month rise since August.
“I wouldn’t go screaming into the streets and jumping for joy, but this is a pretty good report,” said Jay Shackford, a vice president of the National Assn. of Home Builders in Washington. “The housing market is on the mend.”
Permits for new construction--a bellwether of future activity--also rose in April to a seasonally adjusted annual rate of 1.09 million, up 5.8% from March.
The permit rate rose 12.5% in the Northeast, 12.1% in the South and 4.3% in the West. Permits fell 6% in the Midwest.
Builders in Southern California said their business is picking up, as consumers gain confidence that the worst of the region’s economic troubles are over and try to cash in on the lowest mortgage rates in two decades.
“We just put 28 condos up for sale in Moorpark, and we already have 30 reservations for them,” said Tom Zanic of Santa Monica-based Urban West Communities. “People are feeling better about the future, and they’re putting their money where their mouth is.”
The West’s 3.4% rise in starts during April followed an 18% jump in March, when California was recovering from February’s heavy rains. California accounts for about half of the region’s new home construction.
Builders said the strengthening housing market could put upward pressure on home prices, which were already moving higher as demand picked up and lumber prices began to soar.
The median price of a home in the six-county Southern California area now stands at $168,000, up $5,000 since the start of 1993, according to Dataquick Information Systems, a La Jolla-based research firm.
Lumber prices have doubled since last fall, primarily as a result of reduced logging in the Northwest and increased exports to foreign countries. Rising wood prices have raised the cost of building a typical 2,000-square-foot home by $5,000, the NAHB’s Shackford said.
While large home builders can use sophisticated hedging techniques on Wall Street to keep their lumber costs down, smaller developers aren’t as fortunate.
“Our lumber costs are really hurting us,” said Norm Stuard, who’s building a small Mission Viejo tract where homes sell for $349,000 to $449,000. “I’d say (higher lumber) prices have added about $8,000 to each of our homes, but the market’s soft and we can’t really pass the cost on to consumers.”
Prices of wood jumped again on the Chicago Mercantile Exchange on Tuesday, as traders anticipated another surge in new construction.
Housing Starts Seasonally adjusted annual rate, millions of units
April, ‘93: 1.21
March, ‘93: 1.14
April, ‘92: 1.10
Source: Commerce Department
