Virus slows home building but work goes on

Americans hunkering down and stuck at home appear to be in no mood to shop for homes

By John Lindt
Sierra2theSea News Service

CENTRAL CALIFORNIA – So how is the coronavirus affecting a top local industry, home building?

Figures from Construction Monitor show both on the Central Coast and in the San Joaquin Valley, new home permits through March 28 are down by about half compared to March 2019.

In San Luis Obispo some 30 single family home permits were issued in March 2020 compared to 56 in March of last year.

In the Valley, the four county area covered by Construction Monitor shows a slowdown this year as well with 157 new home permits issued this March in Fresno, Madera, Kings and Tulare Counties compared to 322 in March 2019.

The slowdown may be viewed as more severe considering the four-county area was on a tear through January and February 2020 with permits numbering near 900 for the first two months of 2020 compared to 619 for the same months in 2019.

Builders hope to keep projects moving during the crisis to avoid a repeat of the last recession. State health officials changed the wording on the state web site recently to include construction and home construction as “essential” work that could continue during the shelter-in-place order.

The coronavirus may have slowed construction schedules due to consumer hesitance but this week mortgage rates offered some better news.

This past week rates fell. Yahoo News reports that U.S. mortgage rates fell for the first time in three weeks. But for would-be homebuyers frozen in fear of an economic meltdown, borrowing costs are no longer a prime concern. The average rate for a 30-year fixed loan was 3.5%, down from 3.65% last week, Freddie Mac said in a statement Thursday.

Americans hunkering down and stuck at home appear to be in no mood to shop for homes.

Even if they can buy, many worry about how bad the coming recession will be, and how long it will last. A total of 3.28 million people sought unemployment benefits in the week ended March 21, the most in government data going back to 1967.

In an early sign of slipping demand, a index of applications for home-purchase loans tumbled 15% last week to its lowest level since August, according to the Mortgage Bankers Association.

America’s largest builder Lennar had enjoyed good earnings unit this month but just withdrew their year-end guidance. The company announced it suspended its stock buyback program and is reducing the number of homes built on spec, moving out start times, and slowing land purchases.

Locally Tulare County’s largest builder in 2020, DR Horton, saw its stock rise to $62 in February this year only to watch it fall by half to $36 as of March 30.

Real estate web site Redfin said March 25 that home buying demand dropped 27% year-over-year. Redfin scrambled to broaden the availability of its on-line video tours such that by March 23, one-third of home showing requests were for remote showings.

Existing home owners who had been looking to sell into a high demand market are deciding maybe now is not the time. Redfin reported “It’s not just buyers who are pulling back from the market. Homeowners who can wait to sell are putting their plans on hold, too. Last week, we reported that nationwide listing activations were up just a tick over the prior year. Now, in the last seven days, they are down 12% compared to the same time last year. What’s more, sellers with homes on the market are pulling them off at more than twice the rate that we saw last year. Nearly 4% of homes were pulled off the market in the last seven days when the normal rate is about 2%.”

Meanwhile one of the busier builders in Visalia -San Joaquin Valley Homes continues their plans for more subdivisions in town requesting a hearing on a 19 acre project just south of WinCo and Caldwell Ave at Demaree requiring a zone change from the city on land owned by the Christian Reformed Church planted to trees now. Here is map of the property.

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