The “Looking Glass” ponders economic and real estate trends through two distinct lenses: the optimist’s “glass half-full” and the pessimist’s “glass half-empty.”
Buzz: House hunters were the winners, and apartment seekers the losers, in California’s housing construction game in the first half of 2024.
Source: My trusty spreadsheet looked at Census Bureau stats tracking building permits from the year’s first six months, statewide and nationally, for single-family-homes (primarily for ownership) vs. multifamily projects (predominantly rentals).
Debate: Will California’s lofty housing costs catch any significant breaks? A boost in homebuilders’ construction plans for owners – the consumer’s costly option, at least initially – is largely negated by other developers dramatically pruning apartment growth – the more affordable alternative.
Glass half-full
Homebuilders filed 62% of California’s housing permits in 2024’s first six months, the largest share since 2010, and just after the Great Recession decimated the economy.
Why? Developers are taking advantage of limited existing homes for sale and the extra demand from house hunters seeking the discounted mortgage rates offered by homebuilders.
The start of 2024 had 31,653 filings for California single-family housing permits – up 13% compared to 2023’s second half and 14% better than the 10-year average.
Nationally, it was the best half in two years: 511,900 permits – up 10% vs. the previous six months and 19% higher than the 10-year average.
Glass half-empty
Meanwhile, apartment developers are pulling back sharply from their recent building boom.
Construction overshot demand, forcing rents to flatten and landlords to offer concessions to woo new tenants. California’s rental vacancy rate hit 5.2% in 2024’s second quarter, by Census Bureau math – the highest level in 10 years. Those empty units were not a good mix with higher mortgage rates that make new development unprofitable at the moment.
As a result, California multifamily permits hit a 12-year low, down 27% (19,035) from the previous six months and 26% down below the 10-year average.
Nationally, it’s the worst first-half start since 2020: Permits are down 14% (236,700) from 2023’s second half, the previous six months, 34% off 2022’s second half – the busiest since six months since 1986 – and 9% below the 10-year average.
Bottom line
Peeking at the big picture – how many new residences are being planned, for ownership or rental – shows that this was California’s worst half for all housing types since the pandemic struck in 2020.
California’s 50,688 overall permits were down 7% from the previous six months and off 5% from the 10-year average.
US developers remain growth oriented, albeit quite modestly. Their 748,600 permits in the first half were up 1% from the previous six months and 8% above the 10-year average.
Or look at California’s lethargic housing development this way, considering all the legislation and money thrown its way of late: The state had 6.8% of all US permits in 2024’s first half vs. an average 7.7% the past 10 years.
Jonathan Lansner is business columnist for the Southern California News Group. He can be reached at [email protected]
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