Home builders are pulling back from new construction — the opposite of what economists say is needed to ease California’s housing affordability crisis.
Last year, Laurie said, he walked away from a town home project Olson was planning in northern Orange County, giving up a $1-million-plus deposit, because construction costs jumped and he wasn’t confident potential buyers would pay a price that would make the deal pencil out.
Rick Palacios, director of research at John Burns, said developers are always cautious in a softening or declining market, fearful their projects won’t get filled. On top of that, the beginning of 2018 was a relatively strong time for housing construction, making the comparison with this year especially tough.
Even before sales slowed sharply over the last year, investors were focusing on deals with ready-to-build lots, or so-called entitled land, rather than projects that needed time-consuming government approvals to break ground. But now there are fewer lots ready to go and investors have grown even less optimistic, said Michael Marini, principal of developer Planet Home Living. “It’s worse now,” he said. “Everyone wants entitled land only.
He said it’s extremely difficult to build moderately priced housing in California, given high costs, tight environmental laws and neighborhood pushback that delays projects and drives up cost. He and other economists contend the main reason a 1,640-square-foot, 1920s-era house in Silver Lake sells for nearly $1.5 million is that for decades too few homes were built relative to population and job growth.
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