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Home Building Rises Only Slightly in Aug.


California's home-building activity last month hit its highest level for any August in a decade, but the increase was barely a blip over the year-earlier figure and far short of the construction pace needed to meet high demand.

Statewide, builders pulled permits last month that would lead to nearly 137,500 units on an annual basis, according to a housing report released by a unit of the state Department of Finance. That is only 0.5% higher than the previous August's figure.

Although California is on a pace to put up more homes this year, the nation as a whole suffered its seventh straight monthly home-building decline with the deepest drop, 11.5%, last month.

The number of home-building permits statewide shows the amount of development that is about to get underway and indicates how well the state is doing at easing the dramatic housing shortage.

Economists downplayed the August numbers and the somewhat faster pace of home-building. They point out that the housing industry has been unable to keep up with growing demand for new homes.

"Supply is increasing, but very slowly," said John Burns, an analyst at the Meyers Group real estate research firm in Irvine. "There's plenty of demand, but we just can't provide [enough housing]. Over the long term, it will really hurt our economy."

Strong economic growth and slow construction growth will lead to higher home prices and more people unable to afford them, said Jack Kyser, an economist at the Los Angeles Economic Development Corp.

"We're not close to a solution," Kyser said. He warned that rising costs could lead to a call for rent control statewide.

Burns estimates the state will fall about 100,000 units short of what's needed to keep prices reasonably stable. He cited several reasons: stronger-than-expected opposition from local government, increased challenges from environmentalists and growing opposition by homeowners against multifamily homes.

The number of single-family home permits statewide, for instance, grew 17% in August from a year earlier, while multifamily permits declined 8%. Since January, new housing starts are running about 5% ahead of the same period a year earlier.

Builders have their own explanations. Len Frank, a senior vice president at Pardee Homes in Los Angeles, said construction-defect lawsuits have slowed down condominium construction, and the lengthy governmental approval process and lack of buildable sites is dampening construction plans.

The growing shortage in housing for an increasing number of workers, meantime, has helped push home prices and rents to record highs in Orange and Los Angeles counties. In Los Angeles County, for instance, five new jobs have been created for every home built this year.

"It means fewer people will be able to afford to live here," Burns said, "and we'll see more people pick up and leave Orange County."

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