California Mortgage Demand Softens, Single-Family Home Constructions Slows in Sacramento
As the demand for California mortgages slows down, other sectors of the industry are affected.
For example, new single-family home construction in the Sacramento area has plummeted 44 percent in the past year, the steepest new-housing downturn among the five major California regions.
About 6,100 fewer single-family home construction permits were issued for Sacramento, El Dorado, Placer and Yolo counties through October compared to the first 10 months in 2005, according to the Construction Industry Research Board.
The 44 percent drop is significantly larger than downturns in Southern California, the San Francisco housing market, the San Joaquin Valley or the central coast. Statewide, new-home construction dropped 30 percent.
John Schleimer, president of Market Perspectives of Roseville, said higher income levels in larger cities may have softened the impact there, providing more buyers with the leverage to take out home mortgages, while this has hurt Sacramento.
“I think we hit a price wall,” he said of the four-county market. “Investors, who had been 17 to 20 percent of our home buyers during our three-year frenzy, pulled out of the market. Another 20 percent of our population was priced out of a home.”
Moreover, other areas have yet to feel the full brunt of a housing downturn, said consultant Greg Paquin, president of Folsom-based The Gregory Group.
“We got hit first and hard,” Paquin said. “The Central Valley will catch up. They started seeing the effects in the past six months.”
Some heavily populated counties or cities where property is at a premium actually had a housing increase this year. In Alameda County, for example, single-family construction was up, though volume was low because the area has been largely built out.
While builders generally fled from single-family homes this year, the number of permits issued for multifamily units - such as apartments, duplexes and some condominiums - in the Sacramento area surged 16 percent, suggesting builders are economizing on projects and are following a plan that calls for a broader range of housing.
Major regions, such as Los Angeles and San Francisco, also saw an increase in multifamily units.
Because that type of housing is still a much smaller portion of the total new-home market, however, it wasn’t enough to prevent a steep decline in most areas.
Just how quickly will new housing rebound? Schleimer said the current slide will last another year to 18 months, the general consensus among analysts and homebuilders alike.
They have been pointing to the region’s economy, which has a low unemployment rate - 3.9 percent in October - and projected job growth, as reasons for optimism when it comes to California mortgage popularity in the future.