Experts (And the Numbers) Indicate California Construction on Path to Recovery

In scouring the net for the latest news which affects the California construction industry, I recently came across a couple articles that I felt were quite encouraging in nature, indicating a likely increase in California construction work and construction projects as a whole.

The first snippet is a statistical analysis taken from www.dqnews.com and is a comparison of Southern California home sales for February 2008 vs. February 2009.

	Sales Volume			Median Price
All homes	Feb-08	Feb-09	%Chng	Feb-08	Feb-09	%Chng
Los Angeles	3,468	4,590	32.4%	$460,000	$299,000	-35.0%
Orange	1,471	1,879	27.7%	$520,000	$375,000	-27.9%
Riverside	2,147	3,420	59.3%	$325,000	$190,000	-41.5%
San Bernardino	1,242	2,324	87.1%	$290,000	$153,000	-47.2%
San Diego	1,954	2,473	26.6%	$415,000	$285,000	-31.3%
Ventura	495	545	10.1%	$445,000	$327,000	-26.5%
SoCal	10,777	15,231	41.3%	$408,000	$250,000	-38.7%

Though this may not look immediately encouraging, the increase in sales volume, despite the low sales prices, means good news for new construction, general constractors and their subs. With so many loans in default and so many homes in foreclosure, it is a necessity that this market surplus in lower-income home supply be first depleted before lower-income new construction projects can thrive again.

The other article I’d like to share with you is from the WordPress blog of David Edwards. His article summarizes the ideas presented recently at a Realtors summit by Lawrence Yun, chief economist of the National Association of REALTORS®. Here are a couple key quotes from David’s blog:

“[Yun] forecasts price stabilization by the end of the year and a 10 percent to 20 percent increase in sales of existing homes nationwide as the impact of the housing stimulus package kicks in.”

. . . and:

“Yun said the Housing Affordability Index is at its highest-ever level, thanks in part to declining home values and historic low interest rates. Stricter underwriting standards, “frozen” jumbo loans (a big factor in the high-cost markets such as the Puget Sound area), and shaky consumer confidence are impeding sales activity, Yun believes.
Yun also spoke of the correlation (or lack or correlation) between jobs, the recession, interest rates and home sales. In the 2000 recession, “we lost jobs yet had rising home sales because of falling interest rates.” Interest rates make the difference, he said.”

. . . also:

“”Using California as a barometer, Yun said momentum is rising “much faster than I ever anticipated.” In Orange County, where prices are considerably higher than Seattle, activity had been stalled, but began turning around over the past six months. He attributes the shift to a combination of pent-up demand and psychological factors. Some who have been sitting on the fence don’t want to be the last ones left sitting,” he observed.
Yun also cited a return of multiple offers in some California markets. That suggests prices may be bottoming or have bottomed out,” he stated.”

I know what you might say: It’s this guy’s job to put a positive spin on our current recession. But, whenever an “expert” invokes historical evidence and statistics the way Yun has here, I am much more willing to pay attention. Let’s hope that his interpretations have some validity, as it could indicate that California construction is rounding the corner, on its way to a rebound.

Josh Groves
President
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