Sweet Orange

According to Richard Green of the USC Lusk Center of Real Estate, construction of housing has fallen to the lowest level since World War II. (We had other matters to deal with at the time, and home construction wasn’t high on the priorities list.) I don’t know if Green sees this as good news, but as he stated on Larry Mantle’s  AirTalk, it is necessary news.

According to Green, 1.5 million homes can be built and sold in the U.S. annually. However, in the go-go building day of the recent past, 2.2 million homes were being built annually. The inference is that this contributed to the large inventory of homes currently on the market.

Green’s conclusion is that the current reduced level of construction will eventually help to reduce the number of homes on the market. His reasoning is that, since the population will continue to grow and current homes will get older and deteriorate, this will help us to return to a more stable housing market. As he stated on AirTalk , this will help recovery return “sooner rather than later.”

The Orange County Register’s Jonathan Lansner had some related information that is relevant for Orange County. The information is from a recent jobs report from the California Employment Development Department. According to the EDD report, construction jobs in Orange County are down 29% from the peak in May 2002. This translates into a loss of 32,200 Orange County construction jobs. (California’s number is 33% fewer construction jobs than were present at the peak.)

These numbers suggest that reduced housing construction in Orange County will help to deplete the supply of housing that was built up in the boom years and aid a return to a stable housing market. I hope that this mean no more extreme highs or lows—rather a steady state of construction.

However, until we get to that steady state, more pain is in store. A recovery “sooner rather than later,” although necessary, doesn’t mean painless.

“In Orange County, homebuilding dropped to the lowest level in figures dating back to 1946, amounting to a $1.8 billion drop in the industry’s contribution to the local economy, according to estimates.”
—Jonathan Lansner, “More homebuilding cuts seen in 2009″

PHOTO COURTESY THE BUILDING ASSOCIATION OF SOUTHERN CALIFORNIA