Forecast: State to Hit 14-Year High in Home Construction

There’s at least one bright light in California’s lackluster economic outlook: More homes and apartments are expected to be built in 2003 than in any year since 1989, with a large portion slated for Southern California.

Fueled by rising demand, an estimated 170,000 housing units are projected to be constructed this year, according to a report Wednesday by the California Building Industry Assn., a leading trade group.

That would mark a 3.7% increase from last year -- slightly outpacing the national growth rate -- and represent the strongest activity since 237,000 homes went up in the final year of the last construction boom.

The forecast, which outside economists described as conservative, is good news for the state. An increase in home building will help ease a housing shortage and give a boost to businesses that rely on housing, from stone and glass manufacturers to furniture dealers.

The amount spent on residential building, including remodeling, is expected to total $34 billion this year.

“Strong housing construction is good; it’s unambiguously good,” said Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto. “It’s especially good in 2003, when there is sluggishness in other areas of the economy.”

Wednesday’s report was based on data from the Construction Industry Research Board, a research firm in Burbank, and discussions with builders, who are clearly betting that home values will hold up despite the rapid appreciation in recent years.

“This is a reflection that the housing market is still strong in California,” said Randall W. Lewis, an Upland-based developer who has more than 30,000 housing units in the works for the next six years.

Mary Daly, an economist with the Federal Reserve Bank of San Francisco, agreed. The construction boom is “a reflection of builders’ belief that prices and demand are going to continue to remain solid,” she said.

This year, about 124,000 of the 170,000 units projected to be built will be single-family homes, and the rest apartments, townhouses and condominiums. New construction is expected to be especially strong in coastal counties.

Amid rising land costs and other constraints, home building is expected to increase 21.8% in Ventura County this year; 11.9% in Orange County; and 10.2% in Los Angeles County, according to the study.

At the moment, the biggest project in the Southland is at Sun City, a retirement community in Palm Desert, where Del Webb Corp. is constructing 3,523 units.

Riverside County also is seeing lots of action: Shea Homes is developing a 1,300-single-family housing community in Corona, and Western Pacific Housing is building 780 homes there, according to Meyers Group, a research firm in Irvine.

“Given the need for additional housing for California’s growing population, and especially given the economic benefits of new home construction, the forecast for continued growth in housing starts is good news for our industry and the state as a whole,” said Robert Rivinius, chief executive of the state’s building industry group.

Even so, analysts said, the increase in production still would not meet California’s housing needs. The shortage in housing has been aggravated by rapid increases in property values, which have made it difficult for many families to buy homes. California ranks as the least affordable housing market in the United States.

According to state figures, nearly 230,000 new housing units have been needed in California annually for the last 12 years because of several factors, including increasing population, job growth and new families.

“We need many more homes to be built here to keep up with demand,” said Scott Gibson, president of real estate firm Coldwell Banker Greater Los Angeles.