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California and the West

Builders expect pace to stabilize

Permits for 2007 are likely to remain close to last year's number, a trade group says.

January 05, 2007|Annette Haddad | Times Staff Writer

California builders are expected to build about as many or slightly fewer homes this year compared with 2006, amid the continuing housing slump, an industry lobbying group forecast Thursday.

Permits for single-family houses, condominiums and apartments are expected to number between 155,000 and 170,000 this year, in line with 2006's pace but off the near-records set during the housing boom earlier this decade, the California Building Industry Assn. said.

The construction slowdown will continue to affect job growth, said Alan Nevin, the builder group's chief economist, who wrote the forecast. He predicts the state will gain 180,000 to 210,000 jobs this year, about half the level of 2005 and about equal to 2006. But "virtually none" of the gains will be in construction or manufacturing, he said.

Construction activity should pick up slightly in the second half of the year, as builders finish selling their excess inventory by offering price concessions, he said.

The current rate of construction should be accepted as a "new mentality" for builders, who pushed up the pace of building to near-record levels from 2003 to 2005, Nevin said.

"That type of massive increase bent the industry out of shape," he said. "It caused lot and land prices to wildly accelerate, material and labor costs to skyrocket and trade contractors to throw away their standard profit-measurement tools."

By returning to a less-frenzied pace, "we are returning to a normal market," Nevin said.

The builder group also forecast that statewide housing prices would remain soft to stable.

At the same time, Nevin's group reiterated its long-standing argument that building codes are the culprits behind high housing costs, preventing builders from meeting the need for more affordable housing. They urged government reforms.

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