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Home building turns to multifamily

Posted: June 21, 2011 1:55 a.m.
Updated: June 21, 2011 1:55 a.m.

Residential building permits for multifamily units are up, said the Building Industry Association.

 

The residential construction landscape has shifted from single-family homes to multifamily projects, builders and officials with trade associations say.

But an official with the Building Industry Association of Southern California says the trend doesn’t mean the single-family home is out of style.

The multifamily construction, made up of apartment buildings and condominiums, is going to be a bigger piece of the housing picture in the near future, said John Frith, director of government and public affairs officer with the association.

Permit numbers for multifamily-construction projects in the region and statewide are significantly higher than single-family home permits.

But single-family home construction is not going away, according to Frith. Buyer surveys are still showing the majority of homebuyers still want to buy single family homes.

Research shows young adults want to live in hip, urban neighborhoods closer to entertainment and bars, he said.

But when they are ready to get married and start a family they still want to move into single-family homes in neighborhoods with good schools and low crime rates.

Trend only
“We believe the trend (toward multifamily residences) is more reflective of the current economy,” Frith said.

“Once people are convinced the bottom has definitely been reached and it’s safe to go back into the water. You’ll see buyers looking for new homes again.”

The BIA believes that once recovery is under way, a lot of people who have moved back in with their families will be moving back out again.

In a catch-22 scenario, the downturn in construction is one reason why the overall state economy isn’t rebounding as quickly.

The industry is also competing with an enormous number of foreclosures, he said. The lower prices on distressed properties make it difficult for builders to construct new homes and compete pricewise on the open sales market.

And for those buyers who are seeking single-family homes, tighter credit requirements by lenders has made it more difficult for buyers to get loans on homes.

Builder protection
Another reason for the growth in multifamily projects, aside from the economy, is the California Senate bill that was passed in the past decade that affords more protection to builders, Frith said.

In response to a wave of lawsuits against builders for defect claims, legislation was enacted to allow builders to receive a notice of potential claims and be given the opportunity to inspect and repair any construction defects before associations could file civil actions.

“Trial lawyers were going to HOAs and swooping all the homebuyers before a builder had the opportunity to fix the problem,” said Frith.

Market flip
Kick-starting the economy relies on job creation. But with nearly 2 million construction jobs lost across the nation, and millions of estimated foreclosed properties waiting to come to market, single-family home construction will remain slow for the time being.

“It’s just another reminder to state and local government leaders to do things that will incentivize home builders,” said Frith, “instead of making it more difficult and costly to build homes.”

The single-family home-building industry market will rebound when the foreclosures work their way through the market both the BIA and realtors say.

It will take a few years for the market to become healthy again, said Frith. Some markets along the coast are already beginning to see some healthy increases in sales. The long-term outlook for building in Santa Clarita Valley is strong.

“When it’s clear the market has reached bottom, it’s going to flip quickly,” said Frith.

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