Southern California builders slashed construction plans as coronavirus hammered the economy.
My trusty spreadsheet, filled with federal stats tracking the building permits developers file, found steep drops in planning in Los Angeles and Orange counties and statewide in the second quarter. More modest drops occurred in Riverside and San Bernardino counties during the April-to-June period.
“Stay at home” orders designed to slow the spread of the pandemic made home selling and construction tricky. At the same time the broad economic fallout from business limitations made consumers antsy and led many builders to take a cautious approach on new projects.
Builders filed 7,505 permits in the four counties during the quarter, plans for both ownership and rental properties. That’s down 27% in a year and the slowest three-month period since the end of 2012.
That pullback is understandable when new-home sales in the spring quarter were down 13% in a year to 3,419 across the four counties. Still, that was a far smaller dip than closed purchases of existing homes: down 34% to 30,105.
This short-term business logic won’t help Southern California’s chronic housing shortfall. But recent reports by local builders of jumps in orders for future housing in the Inland Empire suggests that home construction may be rebounding soon.
Builders in Riverside and San Bernardino counties got 26% more signed sales contract in June vs. a year earlier, according to Meyers Research. But in Los Angeles and Orange County pending sales fell 19%.
“The housing market in the Inland Empire is stronger than the local unemployment rate would suggest due to more people working from home,” says Meyers analyst Ali Wolf. “Many have realized they can get more bang for their buck by moving inland as long as they aren’t planning on commuting every day.
In Los Angeles and Orange counties, Wolf says builders face the loss of Chinese buyers who favored luxury new homes plus the region’s high land costs that make selling lower-priced housing “as challenging as ever.”
Here’s how second-quarter permits for one-unit housing, a benchmark for single-family home sales, looked in the region …
Los Angeles-Orange counties: 1,622 homes, down 37% in a year and 33% below the five-year average of 2,415 homes. This is the lowest level since 2012’s forth quarter.
Inland Empire: 2,537 units, down 14% in a year and 8% below the five-year average of 2,771 homes. This is the lowest level since 2019’s first quarter.
California: 12,025 units, down 28% in a year and 21% below the five-year average of 15,126 homes. This is the lowest level since 2017’s first quarter.
And here’s at look at total permits filed, which includes everything from single-family homes to condo projects to units in apartment complexes, in the April-to-June period …
Los Angeles-Orange counties: 4,531 units, down 28% in a year and 41% below the five-year average of 7,667 units. This is the lowest level since 2012’s forth quarter.
Inland Empire: 2,974 units, down 24% in a year and 18% below the five-year average of 3,627 units. This is the lowest level since 2019’s first quarter.
California: 21,536 units, down 23% in a year and 23% below the five-year average of 27,926 units. This is the lowest level since 2014’s third quarter.