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California sees drop in home construction permits, rise in market supply in August

September 22, 2010 |  3:31 pm

In the latest indicator that home construction in California is suffering tough times, permits for single-family abodes in August dropped 12% from July.

The 1,811 permits issued for single-family homes in the Golden State last month was a 19% drop from August 2009, according to the Construction Industry Research Board in Sacramento. It was the lowest monthly total since February 2009.

Sales and construction of single-family homes have struggled in recent months with the expiration of federal and state tax credits for buyers. Most economists predicted a tough time for builders this year.

Even so, a piece of positive news for builders came Monday when Lennar Homes of Miami reported a return to profitability in the third quarter. Los Angeles-based KB Home is due to report its third quarter results before markets open Friday.

In terms of total housing units (including apartment buildings and condominiums, as well as single-family homes) 3,598 permits were issued in California last month, a 15% decline from July but up 18% from the same month a year ago.

In another piece of housing news, the California Assn. of Realtors released its August sales report Wednesday.

The most interesting figure from that report is the monthly inventory index because an increase in supply could put downward pressure on prices in coming months.

The group’s index measuring the supply of single-family homes for sale rose to 6.1 months' worth in August, up from 5.8 months in July and 4.6 months in August 2009.

Robert Kleinhenz, deputy chief economist for the group, said the statewide average is 7.1 months, and prices have typically risen when supply remains under that threshold.

Between seven and nine months' supply statewide usually indicates a flat market, without much movement in prices, and more than nine months typically pushes prices down, he said.

Kleinhenz added that the uptick in supply, as measured by the index, is principally due to a drop-off in demand following the recent expiration of the buyer tax credits.

-- Alejandro Lazo