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San Diego home building up slightly so far this year — even in a pandemic

San Diego County has built more housing in the first six months of this year than it did at the same time in 2019 — despite a months-long pandemic.

The increase is marginal — just 64 more homes — but is notable because it is the only county in Southern California that did not build fewer housing units. It’s at least one sign that the construction industry has managed to stay productive during the periodic lock-downs related to rising COVID-19 infection rates.

San Diego County built nearly 4,000 housing units in the first six months, said the Real Estate Research Council of Southern California, or about 1.6 percent more than last year. That compares to the seven-county average decline of 12.5 percent for Southern California.

Construction has been spurred in part by fewer homes being listed for sale, which has led to a recent spike in home prices across the region. That has builders trying harder than ever to keep up, said Alan Gin, economist at the Burnham-Moores Center for Real Estate at the University of San Diego.

“The demand side is still strong and has not been affected by this downturn,” he said. “I think the reason for that is a lot of the damage in terms of job losses has been in lower paying jobs. Those workers weren’t likely to be home buyers anyway.”

The median home price in San Diego County has climbed throughout the COVID-19 crisis for a variety of reasons, say experts, including low mortgage interest rates; buyers seeing increased value in homeownership while stuck at home; and sellers still not wanting to put homes on the market, leading to intense competition for new homes. The median price in the county recently hit its highest ever, $634,000.

Meanwhile, most of the job losses have been in low-skill, low-wage jobs, which has translated to San Diego County’s first rent drop since the Great Recession.

Gin said the high home prices make the construction of new homes in the region more profitable than ever, even if land constraints mean builders can’t turn out nearly as much product as they’d like.

There were 1,771 building permits pulled for single-family homes in the first half of the year, up 20.2 percent from the same time in 2019. Meanwhile, multifamily building — which includes apartments, townhouses and condos — was down 9.5 percent with 2,217 permits filed.

Apartment construction has fueled building activity for years in San Diego County while single-family homes have been more like an afterthought. More recently, though, multifamily construction has been on the decline for several quarters as the pace of rent price increases slowed. It takes years for apartment complexes to come to fruition, so the recent decline probably has more to do with rent growth slowing in 2019 than the pandemic.

Borre Winckel, CEO of the Building Industry Association of San Diego, said the building permits still reflect an industry and region struggling to keep up with demand. Since 2015, San Diego County had typically built 9,500 to nearly 10,000 homes a year. Last year, there were 8,053 homes constructed, a significant drop mainly attributed to slowing multifamily building, which was a disappointment to housing advocates.

The roughly 4,000 homes constructed so far is behind the pace to produce 10,000 homes for the year — a recent benchmark many advocates aim for, even though they say it falls short of what is needed.

“In the grand scheme of things, those (2020) numbers don’t add up to a hill of beans,” Winckel said, “in terms of satisfying true housing demand.”

He typically points the finger at the high costs of regulation in California as a reason why builders can’t construct more homes, but said the city of San Diego’s push for more housing is a reason why San Diego County could be standing out with more building.

Winckel said the regulatory environment for San Diego is relatively better than other major metropolitan areas in the state.

“As much as I like to dump all over the City Council for not getting it,” he said of the need for more housing, “they get it more and better in comparison to Los Angeles, San Francisco or San Jose.”

Ventura County had the biggest drop in home building in the first six months of the year, down 43.3 percent. Santa Barbara County was down 41.3 percent; Orange County down 31.6 percent; San Bernardino County, down 18.1 percent; Los Angeles County down 7.4 percent and Riverside, also down, by 6.5 percent.

Construction is considered to be essential work under federal COVID-19 guidelines, allowing homes and apartments to keep going up while jobs in other sectors were suspended.

Murtaza Baxamusa, director of planning and development for the San Diego Building Trades Council, said it is a good time to be a construction worker because demand has not seemed to slow.

“There is work now and there is work coming up,” he said.

Baxamusa said if there is a larger economic downturn with foreclosures it could change things. But he said he has a hard time imagining it in Southern California because of so many large projects in the works, including San Diego’s efforts to create a new entertainment district on the former Pechanga Arena site with at least 2,100 housing units.

Data for building permits in the research council’s report is provided by the Construction Industry Research Board, which contacts all 58 counties and 538 cities in California for permit data. It sometimes is different from the widely used Census data that provides estimates and has been criticized for a wide margin of error.

 

SOURCE: THE SAN DIEGO UNION-TRIBUNE

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