With fewer homes being built, experts warn that the already sky-high housing prices could skyrocket further due to limited supply, exacerbating the state's affordability crisis.
Rising labor and material costs, coupled with stringent local regulations, are making it increasingly difficult for developers to turn a profit on new projects. The biggest blow comes from the stagnant - and soaring - cost of borrowing.
Preliminary data from the US Census Bureau reveals a stark decline in building permits for new homes nationwide, with California experiencing a 7% drop in 2023 alone. Single-family homes and multifamily units are both seeing decreases, signaling a worrying trend for the housing market.
Dan Dunmoyer, president of the California Building Industry Assn., attributes much of the decline to cautiousness among for-sale home builders, who anticipated a market downturn amid soaring mortgage rates in 2022. However, the anticipated drop in demand didn't materialize, leaving builders scrambling to catch up.
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