New-Home Permits Rise Slightly in April

Planned construction in California barely rose last month from a year earlier, showing that little progress is being made in addressing the state’s housing needs.

Permits were pulled in April at an annual rate of 163,000 units, up 5.5% from the previous month but an increase of less than 1% from a year earlier, according to a state analysis of industry figures.

“It just won’t be enough,” said Howard Roth, chief economist for the Department of Finance. “This is a prescription for higher prices.”

Construction at year-ago levels will make little progress against a widening housing deficit, Roth said. The problem could worsen this year if economic growth creates a bigger appetite for housing, putting upward pressure on prices.

At the current rate of production, Roth added, “we will have affordability problems in good times and bad.”

California results were in contrast to the nation. U.S. building permits, an indicator of future construction, grew 0.3% last month to an annual pace of 1.63 million units. Although dipping from a record pace earlier this year, national housing construction is expected to remain at a relatively high level.

Builders across California are struggling to plan all forms of housing, especially lower-cost multifamily units that usually face harsher scrutiny from opponents. In April, permits for apartments, condominiums and townhomes fell by more than 5% from a year earlier. Permits for single-family houses rose by more than 3% during the same period.

Analysts estimate that builders are producing 55,000 to 100,000 fewer units than what is needed to absorb annual growth. The shortfall has led to a record-low supply of housing in the state.

That scarcity comes at a time when consumers are drawn to the market in large part by historically low mortgage rates. Many home sales have turned into auctions, causing prices to rise statewide. And occupancy rates for rentals have remained firm in the most populous counties despite the clamor for homeownership.

Development patterns in the Southland varied from county to county, though most markets were flat or gained little from the same month last year, according to April figures compiled by the Construction Industry Research Board, a Burbank research firm.

Permits issued in Los Angeles County totaled 4,779 for the first four months of the year. The current number, down more than a third from a year ago, represents the lowest four-month total since 1999. Development fees imposed in January 2001 helped inflate last year’s figures as builders rushed to get permits before the price increase.

Orange County registered a gain of one-third to 3,461, contrasted with a weak performance in 2001. Last year’s four-month figure was the smallest since 1995.

Riverside and San Bernardino counties have recorded a 14% increase since January from the same period last year, while San Diego County has been flat. Ventura County, which produces the smallest base of new housing in the region, has dropped more than half to 670 units from a year earlier.

The number of permits issued can vary widely from month to month, influenced by such factors as weather conditions or an impending increase in construction fees. Still, market observers say, production in Southern California remains far less than what’s required to shelter a burgeoning population.

In a period of less than two years ending in January, Southern California’s population expanded by 688,000 people--more than the city of Baltimore, said Jack Kyser, chief economist for the Los Angeles Economic Development Corp.

“Housing is not roaring ahead,” Kyser said. “It is not anywhere near the level we need.”

Consumers, meanwhile, are trying to purchase homes while they can afford them, said Esmael Adibi, an economist at Chapman University. Job growth--considered a leading indicator of housing demand--has been weak, but consumers are barreling ahead.

“They’re saying, ‘Prices are going up, and I had better buy now rather than wait until next year,’” Adibi said.

That is a change from several months ago, when the market paused for several weeks after Sept. 11 as consumers reassessed their home-buying plans. Builders, meanwhile, became less aggressive in acquiring new lots.

But builders saw a burst of sales within a few weeks as mortgage rates fell to a 30-year low. The changing attitude caused builders to ramp up production.