Home Front

A blog about the economy and the Sacramento-area real estate market.

January 30, 2009
Worse than 1993 and 1982 for California's housing starts
 I was 11 years old and living on the family farm in Ohio in 1963, when the biggest surge of the postwar California boom erupted with a stunning 322,018 housing starts!

 What an amazing sight that must have been. Anyone who has griped since about "all this construction" surely can't even fathom that level of building activity.

 But everyone alive now in California has just lived through the opposite of that superstar year.

 The Construction Industry Research Board and California Building Industry Association now reports 65,380 construction starts in 2008. It's the lowest since CIRB began keeping records in 1954 in the Eisenhower Administration.

 It is so low that builders in the dismal, economic wreck of  a year, 1982, when mortgage interest rates averaged 16 percent, built almost 22,000 more houses than last year, according to the archives of federal mortgage giant Freddie Mac.

 It's so low that even in the lowest point of the 1990s recession - 1993 - with Southern California base closings, a defense industry imploding in the wake of the cold war ending, with job losses from San Diego to Eureka, builders still planted 84,656 houses on California soil. That's 19,276 houses more than last year.

No wonder last year was all about downsizing, layoffs, consolidations and bankruptcies in the home building industry. It was far worse than the worst this state has ever seen.

The Construction Industry Research Board and CBIA offers this chart of home starts from 1954-2008.

 Yuba and Sutter counties showed the state's most severe regional slowdown in 2008. Builders started 191 homes in the once-booming areas for Sacramento-bound commuters, down 79 percent from 932 starts in 2007.

Builders in El Dorado, Placer, Sacramento and Yolo counties started 3,990 homes in 2008, down 43 percent from 6,999 in 2007.

  Bad as this slowdown is for the construction industry and builders, it's Economics 101: anything that reduces supply in this overbuilt environment is a force for market correction. 

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