Housing Construction Surges
A white-hot housing market prompted Ventura County builders to begin construction of nearly 2,200 new dwellings during the first half of 2003, a pace analysts say could result in the biggest year for residential development since 1989.
A prolonged boom in home sales and escalating apartment rents have combined to make housing construction so profitable that local developers obtained 970 more building permits from January through June than for the same period the year before, an increase of nearly 80%.
The rate of construction is more than double that of a decade ago, when county residential construction bottomed out amid a severe recession.
The picture is much the same throughout California. Builders were issued nearly 100,000 residential permits in the first half of the year, a statewide increase of nearly 26%, according to the Construction Industry Research Board.
“It’s the best year since 1989,” said Ben Bartolotto, the board’s research director. “Of the 25 metropolitan areas, 19 have gains, so it’s pretty broad.”
Leading the way again, by a large margin, was the Riverside County-San Bernardino area, followed by Los Angeles, Sacramento and San Diego counties. More than half the permits issued statewide -- 52,069 of 98,695 -- were in Southern California. More than a quarter were for apartments.
The surge in construction, a partial antidote to the state’s housing shortage, is still far too slow to match state growth of about 600,000 residents a year.
State housing officials report that California needs about 230,000 new dwellings a year to keep pace. Only about 186,000 are forecast to be completed this year, a shortfall of 44,000, Bartolotto said.
Construction is sharply higher, he said, partly because more investment has flowed into the housing market during a time of minuscule returns on money market and savings accounts and a balky stock market.
“It’s an attractive alternative,” Bartolotto said.
At the same time, historically low interest rates have temporarily made California’s housing market -- the most expensive in the nation -- more affordable.
“We’re as busy building and selling homes as we’ve been in at least 10 years,” said Steve Seeman, vice president for Shea Homes in Ventura and Los Angeles counties. “It’s been really strong for three years.”
A decade of pent-up demand is pushing this building boom, developers said. And with Ventura County apartment rents averaging about $1,200 per month, up 50% since 1997, builders are willing to invest in new complexes, said analyst Dawn Dyer, president of the Dyer Sheehan Group in Ventura.
For the first half of the year, the number of apartment building permits issued in Ventura County skyrocketed to 873, compared with 105 at the same time the previous year.
“Apartment projects are finally being built because there’s just so much demand,” Dyer said. “Homes are just out of the reach of working-class folks.”
Low interest rates have trickled down to help not only home buyers but apartment builders, Dyer said.
“Rents have gone up enough and interest rates are low enough that some of these big boys can afford to do these large projects again,” she said.
For example, an apartment complex of more than 300 units is set for construction in east Ventura, and another is being built near City Hall in Simi Valley.
Along the Ventura Freeway in north Oxnard, hundreds of luxury apartments have been constructed that rent for about $2,000 a month.
Added to that mix are billions of dollars in state and federal subsidies for low-cost apartments and single-family homes that have produced the largest spate of affordable housing development California has seen in decades.
In Ventura County, most of the new building permits were issued in Oxnard and Simi Valley, with 612 and 584 permits, respectively. Thousand Oaks builders obtained 395, and 217 were issued in Moorpark, 126 in Camarillo and 103 in Ventura.
Riverside and San Bernardino counties accounted for one-fourth of the building permits issued in the state. There, where affordable homes are more plentiful, the number of permits issued soared by about 8,400 to more than 24,000.
While the accelerated level of construction is a boon, building industry analysts said that only about one-third of California households could afford a home, compared with more than one-half nationwide. And they warn that rising interest rates could hurt the home sales market.
The interest rate on a 30-year home loan now exceeds 6%, up about half a point in the last month.
“Obviously, that’s something to be concerned about,” said Tim Coyle, vice president of the California Building Industry Assn.
“I’m sure most economists will tell you that a half-percentage point increase is significant. With this backdrop of high demand and substandard supply, if mortgage rates pick up, we may have a serious affordability problem.”
