Business

Building of new homes dries up

New home construction has plummeted dramatically the past two years throughout the Northern San Joaquin Valley.

Single-family home starts plunged 73 percent in Stanislaus County, 80 percent in Merced County and 64 percent in San Joaquin County.

About 14,000 homes were built in 2005 in the region, but only about 4,000 were built in 2007, according to statistics released this week.

"It's terrible out there," Pam Franco, president of the Building Industry Association of Central California, said Wednesday. "We've known the (2007) totals were going to be brutal, and we absolutely feel it."

During De- cember, for ex- ample, only 16 new home building permits were issued in Mer- ced County. Compare that with 317 permits issued in December 2005.

"There's a lot of housing inventory left in Merced County from foreclosures and from new homes (that were built for) buyers who bailed out because they couldn't get loans," said Franco, who co-owns the Heirloom Collection development in Atwater. "It's horrible to get a loan right now, even for people who have good credit."

So many houses are for sale, Franco said, that "builders are being real cautious right now" about pulling permits before they're sure they have confirmed, qualified buyers. Because of that, she doesn't expect new home construction to increase anytime soon.

"A lot of different industries are suffering right now because of this housing downturn," said Franco, citing slow sales for cars, window treatments, home improvement supplies and even at restaurants. "Incredible amounts of people are out of work now."

While home construction hasn't declined as much elsewhere in California, it's still bad.

The California Building Industry Association said single-family home construction in 2007 fell to its lowest level in 25 years. Since the 2005 peak, the number of new California homes built has fallen 56 percent, to less than 68,000.

The association's chief economist, Alan Nevin, said signs point to a recovery in the new-home market later this year, especially because the Bush administration and the bipartisan House leadership have agreed on a housing stimulus package.

"It is now apparent that the federal government is coming to the rescue, and none too soon," Nevin said. "The combination of declining interest rates, in- creasing the conforming loan rate and improvements in the FHA lending practices will lead to a more rapid recovery than initially anticipated."

Nevin said a major increase in refinancing activity that is now under way is an important first step toward full recovery, and the tax rebate checks expected to be sent to most taxpayers this spring will help.

"The resale market is anticipated to pick up substantially in the next few weeks in California as the buyers who have been sitting on the fence return to the marketplace," Nevin predicted.

"Typically, there are four-to-five resales sold for every one new home built in California. Therefore, the vibrancy of the resale market will generate demand for new-sale housing," he said. "It is likely we will see this situation materialize by the third quarter, perhaps sooner."

Bee staff writer J.N. Sbranti can be reached at jnsbranti@modbee.com or 578-2196.

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