With rising construction costs and slowing sales, California homebuilders are tapping the brakes on new projects.
The trend is a step backward on what experts say is required to help the state ease its housing crisis, the Los Angeles Times reported. Homebuilders were approved for 51,178 new homes during the first half of this year, a 20-percent drop compared to the same period last year.
In Los Angeles and Orange County, total permits dropped 25 percent. Single-family permits fell 18.5 percent, and multifamily permits dropped 28.6 percent.
The rate has California set for the most significant decline since the recession. Christopher Thornberg, founding partner of Beacon Economics, told the Times, “We are going in exactly the wrong direction.”
Real estate experts and developers said the slowdown is caused by how difficult it has become to make money building homes, as prices and rents continue to soften throughout the state.
Builders said costs are rising for land, government fees, and tariffs on products. Costs for labor and materials have jumped throughout the state while home prices have stayed flat for many areas, according to John Burns Real Estate Consulting.
Scott Laurie, chief executive of Olson Co., said last year the firm walked away from a project in Orange County, sacrificing more $1 million in deposit money because of rising construction costs. [LAT] — Gregory Cornfield