New Homes

It’s no wonder that builders have standing inventory leftover from last year. Area builders pulled 20,000 building permits for single –family homes, condos and apartments during 2005. One of every 10 house starts in the state last year was built within 50 miles of the state capital. The leading areas for new construction were: Lincoln with 2,689 new homes, Elk Grove with 2,428 and the Natomas Bowl (12 feet below the Sacramento River and surrounded by weak levies) with over 2,000 new home starts.

The building industry doesn’t anticipate 2006 will see as much new construction as they did in 2005. Rising interest rates and leftover inventory will slow new building permits in the area and across the state.

The California Building Industry Association expects new home starts statewide to drop to 190,000 units in 2006 compared to the 208,804 last year. New single-family homes will account for 155,000 of all permits pulled this year while 54,000 new starts will consist of apartments and condos.

Last year California ranked third in the country in new construction behind Florida with 287,000 residential units and Texas, which started 210,000 new homes. Although the Capital Region accounted for 10 percent of all new construction in the state, Los Angeles ranked first for the number of new units built with 11,550. Sacramento’s ranking was seven, Elk Grove 14 and El Dorado County with 1,621 new starts ranked number 34.

The building industry is overly optimistic. Watch for new permits in the area to drop more than the 10 percent industry analyst anticipate. Many builders are currently reevaluating their construction schedule. Builders have continued their sales volume by deep discounts and incentives for buyers. That will not continue.