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San Diego on track to build more housing than last year

San Diego on track to build more housing than last year
Homes in Chula Vista in November 2018. (Nelvin C. Cepeda / San Diego Union-Tribune)

San Diego County appears to be on track to build more housing this year, led by increases in apartment construction.

For the first nine months of the year, San Diego County has built about 8,519 housing units, up from 6,054 at the same time last year, said the third quarter report from the Real Estate Research Council of Southern California.

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In each of the past three years, the county built under 10,000 homes — far short of what housing advocates had hoped for given job and population growth. While the higher numbers were a welcome sign, permits were heavily skewed toward rental units.

“The numbers exceeded last year and that’s good,” said real estate analyst Gary London. “The takeaway is most are apartments that are in the most urban areas. Disproportionately, we are not building homes for families.”

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Source: Real Estate Research Council of Southern California DANIEL WHEATON U-T Residential building permits San Diego County may build more housing this year. +41% +7% +8% -5% +35% -21% -33% -40% *Of first 3 quarters of the year Los Angeles Orange Riverside San Bernardino Ventura San Diego Santa Barbara Southern California 4,313 2,258 1,502 1,383 351 1,409 125 11,341 6,113 3,678 2,459 2,529 952 2,827 670 19,22 5,888 1,514 1,280 1,463 321 1,818 298 12,582 5,267 2,309 1,879 1,457 304 2,807 221 14,24 9,011 2,299 2,913 1,611 384 4,146 344 20,70 3,317 2,478 2,286 1,183 290 1,566 167 11,287 County Q1 2017 Q2 2017 Q3 2017 Q1 2018 Q2 2018 Q3 2018 Percent change from 2017*
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Increases were largely led by new apartment buildings in downtown and University City. In the first nine months, 5,738 multifamily permits were pulled, an increase of more than 70 percent from the same time last year. Townhouses and condos are included in multifamily numbers but make up a much smaller portion of the market.

Single-family housing permits were also up, but not by much. There were 2,781 permits pulled, about 3 percent more than the same time last year.

London, who consults on housing projects with his firm London Moeder Advisors, said the numbers reflect a period of intense apartment building because of rising rents. He said he doubted the same numbers would be seen in 2019 as rent prices stabilize. Also, London said the multifamily construction showed building was mainly targeting a small segment of the market — high-end urban.

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It is possible that San Diego County could still end up building less housing in 2018. Rising steel prices and labor shortages have been cited by developers as reasons to hold off on new projects.

Also, even if the county builds more housing in 2018 than previous years, it still falls short of what experts say it needs to build based on population growth and the needs for workers in the strong economy. London said the best case scenario would be 20,000 housing units built a year with a more even distribution geographically, and by product type.

“The concerns that I’ve always had about the housing market remain,” he said.

Alan Nevin, a real estate analyst with Xpera Group, said the lack of new single-family homes experienced this year could be worse at the end of 2018 and into 2019 because of a slowdown in the housing market. So far this year, Trulia Research said San Diego had the most reductions — 20.5 percent — of the 100 biggest metro areas in the United States. (It tied with Tampa, which also saw 20.5 percent of homes with a price cut.)

“(Single-family) is not doing terribly well,” Nevin said. “When I talk to builders, they are crying the blues.”

On a percentage basis, San Diego County had the biggest increase — 40.7 percent — in residential permits pulled in Southern California in the first nine months. Riverside County was up 35.1 percent and Los Angeles County up 7.9 percent.

Orange, San Bernardino, Ventura and Santa Barbara counties have all built less housing so far this year.

For contrast, there were 17,306 new homes built in San Diego County in 2004 and 15,258 in 2005. Following the housing boom years, building drastically reduced. During the Great Recession, in 2009, fewer than 3,000 homes were built.

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Even as political pressure for more housing increased locally and at the state level in the last three years, San Diego County has been building less than 10,000 homes. There were 9,975 new homes constructed in 2015, 9,972 in 2016 and 9,580 in 2017.

Most forecasts predict an increase in new homes in California in 2019. The California Association of Realtors predicts an 8 percent increase in new home construction; California Department of Finance, 11.3 percent; and 4.6 percent from the UCLA Business Forecasting Project.

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