By Austin Kilgore
The direct influence of the California homebuilding industry contributed $13.8bn to the state economy and supported nearly 77,000 jobs in 2009, according to a new study (download here) commissioned by the California Homebuilding Foundation and conducted by the Center for Strategic Economic Research, institutions both based in the California capitol of Sacramento.
The decline in new home construction in recent years has impacted the sector and accounted for 0.4% of the state’s total domestic output, down from recent years. But the indirect activity the sector supports — remodeling, repair, brokerage, property management and financing — contributes an additional $347.3bn of economic output and supports 1m jobs in the Golden State — 11% of the state’s economy.
The report projects that new household formation and population growth creates a demand of 220,000 new residential properties each year. But new housing construction has lagged behind that estimated demand since the late 1990s, and permit levels have fallen well short in recent years — down 83% between 2005 and 2009, the report said.
“An annual production level closer to the statewide need would significantly increase the economic benefits of new housing construction in California,” the report said.
When California housing construction peaked in 2005, permit levels topped 205,000 units, and the industry contributed $67.7bn to the state economy and supported nearly 487,000 jobs. In 2009, permits totaled 35,000, with the aforementioned $13.8bn economic impact and 77,000 jobs.
The report projects increased permit levels this year, along with increased economic output and more jobs than in 2009. “However, the forecast for 2010 still shows new housing activity well below the long-term average,” the report said. “Overall, the declines in new housing construction’s contribution to the state’s economy are considerable, and the impacts affect a wide range of linked sectors.”
The impact of the residential real estate market couldn’t be more pronounced than in the San Francisco area, among one of the largest housing markets in the state and an area that recently, has been subject to market swings.
Multiple home price indices put San Francisco among the best performing markets in terms of home values. But a recent report by the San Francisco Association of Realtors shows sales volume is down this summer.
Completed home sales in the San Francisco area during the month of July are down 18% from the same month in 2009. Meanwhile, the median single-family home sales price increased 0.6% from July 2009 to $785,000 in July 2010.
That decrease in sales was attributed to consumer concerns over job creation, and a double dip in the economy, the association said.
When online real estate listing service Zillow reported a 3.6% year-over-year dip in home prices for Q210, the report noted that San Francisco had the second highest increase in prices, up 5.9% from 2009, second only to San Diego (which experienced a 7.3% increase.) A July report on June 2010 sales prices by the brokerage chain RE/MAX showed San Francisco prices were also up 18% from June 2009. Those increases could be the result of more higher-priced homes for sale on the market.
“While the sale of higher-priced homes has gained traction in recent months,” said John Lee, president of the San Francisco Association of Realtors, “moderately priced homes continue to make up a considerable portion of sale activity in San Francisco, especially in comparison to historical levels.”
URL to Original Article: http://www.reoi.com/news/economic-impact-of-calif-homebuilding-down-in-2009-2010-sales-struggle
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