More Weakness in the New Home Market

Last week, the Sacramento Bee reported on falling housing starts:

...Housing construction also fell last year in the Sacramento region. Permits for 15,559 single-family, detached homes were issued in Sacramento, Placer, El Dorado and Yolo counties in 2005, down 17 percent from 18,680 units in 2004. Across the capital region, permits for 2,901 apartment and condominium units were issued last year, down 19 percent from 3,587 units in 2004, CIRB data show.

In Sacramento County, the 7,811 permits issued last year for single-family homes represented a 23 percent drop from the 10,185 units issued in 2004. It was the largest year-over-year decline among the state's top 10 counties for single-family construction, CIRB data show.

CBS 13 had this report:

...Houses still sprout overnight like pumpkins from fields that used to be rural. Yet, there are signs that the sun is setting on an overheated housing market. California home builders say the number of housing starts--permits to build new homes--dropped from more than 212,000 in 2004, to just over 207,000 in 2005--a drop of nearly three percent. It was the first drop in ten years, but everything's relative. "2005 was a great year, and a 2.7% drop is not bad at all," said John Kellogg, realtor.

Realtors like John Kellog notice a bit of chill in the air. "Last year I could sell a house in a couple of days to two weeks, whereas now it seems to be going more from a month to three months," said Kellogg.

Builders expect construction to decline as much as 11% this year as home values appreciate more slowly. "2006 will not be as hopping as those years, but definitely a solid, good year and we're looking forward to that," said Ana Helman, North State Builders Association.

Kellogg just hopes home buyers are, as well.

"They're not really sure what to do yet, whether the market's going to go down, so I think they're just testing it," said Helman.

So what happens if more and more potential buyers keep testing...and testing?