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Homebuilding stuck in doldrums here and throughout the state

Not many new homes are being built in the Merced area these days, a trend also seen throughout the state, according to California Building Industry Association figures.

The builders' group said building permits were pulled for only 3,151 single-family homes statewide in November; last month in Merced County 35 building permits were issued for new homes, four more than October but 48 fewer than in November 2006.

Don Gray, president of the Merced chapter of the Building Industry Association, said homebuilders have recognized the lack of demand for new housing and won't build new dwellings unless there is a demand for them.

"There has never been a huge demand for houses this time of year," Gray said. "Builders are pulling in their horns. There is a glut of excess inventory, mostly used homes. It will be some time until the market comes back."

The drop in new homes for Merced County between last month and November 2006 represents a 57.8 percent decline. The state BIA says production of new housing in California declined further in November as homebuilders continued to take steps to reduce inventory before year-end.

Merced Mayor Ellie Wooten, a real estate agent, conceded the new home market is very slow. She can understand builders' apprehension in starting new homes, given the current climate. "This (slump) won't last forever," Wooten said. "We will see things happen. The marketplace is getting back to where it should be."

The standing inventory of new homes in the Merced area is around 70 units, some of which may be display models. Most of the glut in existing inventory includes used homes. There should be an improvement in the housing market in the early to middle part of next year, but it may take until spring 2009 for a strong rebound, Gray said.

Total housing starts in California, as measured by building permits issued, dropped 45 percent in November compared to the same month a year ago to 5,498, according to housing permit data supplied by the Construction Industry Research Board.

Statewide production of single-family homes fell nearly 50 percent, while construction of multifamily units decreased 36 percent compared to November of 2006.

Merced City Manager Jim Marshall said new building starts have been affected by vacancies in existing housing and available stock that hasn't been sold. He estimated there are about 800 vacancies in existing houses.

The city of Merced issued 10 building permits for single-family homes last month; from January through November of this year 168 permits were issued for single-family homes. In the same period last year, 937 single-family home permits issued, Marshall said. "The buyer has a lot of choice and that may not be beneficial for new home construction," Marshall said.

Gray, a land-acquisition specialist with Summerton Homes, said in a boom market, homes were sold as fast as they were built. Even with homes built on speculation, most were bought before they were even finished.

According to Construction Industry Research Board statistics, the single-family production level last month in California was the lowest recorded during November since 1981, when just 2,452 permits were pulled across the state.

CBIA President and CEO Robert Rivinius said he hopes state lawmakers will take a much-needed look at making home production more feasible when grappling with the $14 billion deficit projected for California's budget next year.

"The homebuilding industry has been a major economic engine for most of the past decade," Rivinius said. "However, with ever-tightening regulations and restrictions put on homebuilding, the industry is no longer generating the employment and tax revenues it had been in the early part of this millennium.

"It would only make sense for policymakers to address the overregulation put on homebuilding and to ease restrictions while streamlining the homebuilding process to help jump-start the economy and put much-needed revenue back into state and local coffers, which by the looks of things, is urgently needed."

Rivinius also noted that a number of local jurisdictions continue to increase fees imposed on the construction of each new home even during a downturn in the market, further hampering the ability of working families and first-time buyers to be able to afford their first home.

In October 2006, 136 single-family home permits were issued in Merced County and 83 for November 2006, BIA statistics show. For the first 11 months of 2006, 1,990 single-family permits were issued in the county, compared with 675 for the same period this year, reflecting a 66.1 percent drop.

Associate Editor Doane Yawger can be reached at 209 385-2485 or dyawger@mercedsun-star.com.

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