San Diego could probably use more housing to cope with rising prices, but housing construction was unclear by the beginning of the year.
According to data released this week by the Southern California Real Estate Research Council, 2,700 building permits were issued in the first three months of the year, down 5 percent from the same period last year. Construction focused mainly on apartments, driven by historical rent growth.
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San Diego County is experiencing a strong year for home construction. In 2021, 10,188 building permits were issued, marking the first time in 15 years that the area had crossed the 10,000 mark.
San Diego was not alone in a slow start to the year. Housing construction fell 3 percent in Southern California, Orange County (down 46 percent year-on-year) and Los Angeles County (down 13 percent). In both cases, the reason for the decline was the decline in apartment construction compared to the large projects in progress last year.
Alper Nevin, a real estate analyst at Xpera Group, said the cost of labor and materials for developers is higher, but the rise in rents and sales prices for homes is enough to delay the industry. In particular, he noted that the prices of new homes are constantly rising, in contrast to the home resale market, which seems to have been more affected by rising mortgage rates.
“The market has not suffered at all from rising interest rates,” he said. “Sales of new homes continue to be very strong, even as prices have picked up.”
The average price of a newly built home was $ 809,500 in May, which combines apartment buildings, townhouses and single-family homes, CoreLogic / DQNews said. This was the highest median – the point at which half homes were sold at higher prices and half cheaper – since October 2018, when an influx of new luxury single-family homes entered the market.
In the first quarter, 990 single-family home permits were issued, which is 25 percent more than a year earlier. Some of the biggest projects currently underway are 3Roots Mira Mesas, where single-family homes start at $ 1 million; Merge35 near Torrey Highlands, where homes start at $ 1.7 million; and the Chula Vista Otay Ranch, which starts at $ 705,900.
Nevin said that the rise in rental prices has also kept apartment construction at a strong pace. In the first quarter, 1,710 multi-family residence permits were issued, which is 16 percent less than last year. Like Orange and Los Angeles counties, San Diego opened many more condominiums in the first three months of last year.
Permits for multi-family homes can be complicated because, unlike single-family homes, a developer can obtain 400 permits at a time and distort the numbers – making year viewing a little more useful.
Developers have a good reason to keep the apartment train running. The average rent in the first quarter was $ 2,236 a month, up 14.3 percent year-on-year, according to real estate company CoStar. One of the region’s newest projects, The Society in Mission Valley, costs an average of $ 3,700 a month.
State labor officials said the developers’ desire to push through new developments has helped the San Diego construction industry, which employed 84,200 people in April. It had added 1,100 jobs in a year.
Most estimates predict that California will continue to build about the same number of homes this year. The California Association of Realtors forecast 119,014 new licenses, up 3 percent from 2021. The California Treasury Department predicts 122,150 permits, up 5.8 percent.
While 10,188 homes were built in San Diego County last year, more than after the recession of the Great Recession (2,990 in 2009), it wasn’t close to the turn of the century. 17,306 homes were built in 2004 and 15,258 in 2005.
Los Angeles County had the highest number of permits in the first quarter, with 5,327. This was followed by Riverside County with 3172; San Diego County with its 2,700; Orange County in 1797; Province of San Bernardino in 1688; Santa Barbara County with 581; and Ventura County 375.
Data on Southern California building permits in the Board of Inquiry report is provided by the Construction Industry Research Council, which contacts all 58 counties and 538 cities in California for permitting information. This sometimes differs from the widely used census data, which provide estimates and have been criticized for their wide error rates.