Housing Construction Forecast Cut by Builders

Responding to the state’s slowdown in home sales, California builders on Wednesday lowered their forecast for new-home construction this year.

Builders expect to obtain permits for 170,000 to 180,000 units this year, about 15% to 20% below 2005’s near-record of 210,000, according to the new forecast issued by the California Building Industry Assn., a trade group.

Earlier this year, the group forecast construction of 190,000 new homes this year.

The rapid run-up in home prices, rising interest rates and growing inventories of unsold new and existing homes is forcing builders to scale back construction, said Alan Nevin, chief economist for the trade group.

“We are now seeing substantial changes within California on a market-by-market basis,” said Nevin, who issued the revised forecast at the group’s annual convention in San Francisco, where 34,000 builders, contractors and suppliers have gathered this week.

He said construction of single-family homes has slowed in most regions of the state, particularly in Northern and Central California. Multifamily building of condominiums, town homes and apartments remains strong in most markets, except in San Diego, where high-rise development in the downtown area has evaporated, Nevin said. Condo construction is booming in urban areas of Los Angeles and Orange counties.

Despite the revised forecast, 2006 housing production is expected to be the fourth highest in 17 years, Nevin said.