Larger than Expected Decline in New Home Construction

Riverside and San Bernardino Counties accounted for 50% of the total decline in California's single family housing permit activity for the first four months of 2007. 

Alan Nevin, Chief Economist for the California Building Industry Association attributes this decrease to two factors.  The first is record-high gasoline prices.  Most new home buyers in Riverside/San Bernardino counties are typically commuting to jobs in areas where home prices are much higher.  The increase in gasoline prices, however, is equal to the purchasing power of $40,000 to $50,000 in home value.  Therefore, the savings realized in mortgage payments by purchasing a home in these areas has dissipated.

The second factor in the decline is that most of the new homes sold in Riverside and San Bernardino counties have been sold to first-time move-up buyers.  These potential buyers have been hit by the slowdown in the resale market.  First-time move-up buyers hoping to move to the area have been unable to sell their homes for prices that would provide the necessary equity to purchase a new home.

REVISED 2007 FORECAST

Area                              Total Home Construction          Single Family                Multi-Family

Riverside                           15,000-17,000                   12,000-13,000              3,000-4,000

San Bernardino                  10,200-11,500                     9,000-10,000              1,200-1,500  

Source:  California Building Industry Association