The “Looking Glass” looks at economic and real estate trends from two different perspectives: the “glass half full” of the optimist and the “glass half empty” of the pessimist.

Totals: In California’s housing game in the first half of 2024, house hunters were the winners and home seekers were the losers.

Source: In my trusty spreadsheet, I examined Census Bureau statistics tracking building permits issued for the first six months of the year at the state and federal levels for single-family homes (mostly for ownership) versus multifamily homes (mostly for rental).

Debate: Will California’s high housing costs come down significantly? A surge in homebuilders’ plans — the expensive option for consumers, at least initially — will be largely offset by other developers drastically cutting back on homebuilding — the cheaper alternative.

The glass is half full

In the first six months of 2024, homebuilders filed 62% of building permits in California, the highest share since 2010, shortly after the Great Recession hit the economy hard.

Why? Developers benefit from the limited number of homes for sale and the additional demand from home buyers looking for the low mortgage rates that developers offer.

At the beginning of 2024, 31,653 applications for single-family building permits were filed in California – 13% more than in the second half of 2023 and 14% better than the 10-year average.

At national level, it was the best half-year in two years: 511,900 permits – 10% more than in the previous six months and 19% more than the average of the last 10 years.

Glass half empty

Meanwhile, housing construction companies are significantly scaling back from their recent construction boom.

Construction activity outpaced demand, leading to stagnant rents and concessions from landlords to attract new tenants. California’s rental vacancy rate reached 5.2% in the second quarter of 2024, according to Census Bureau calculations – the highest level in 10 years. These vacant units did not combine well with the higher mortgage rates that are currently making new construction projects unviable.

As a result, multifamily building permits in California fell to a 12-year low, down 27% (19,035) from the previous six months and 26% below the 10-year average.

At the national level, this is the worst start to the first half of the year since 2020: approvals are down 14% (236,700) compared to the second half of 2023 and the six months before, down 34% compared to the second half of 2022 – the busiest second half of the year since 1986 – and down 9% compared to the average of the last 10 years.

Conclusion

A look at the big picture—how many new housing units are planned for sale or rent—shows that this was California’s worst six months for all housing types since the pandemic began in 2020.

In California, a total of 50,688 permits were issued, a 7% decrease from the previous six months and a 5% decrease from the average over the past 10 years.

U.S. developers remain growth-oriented, albeit quite modest. Their 748,600 building permits in the first half of the year were 1 percent above the previous six months and 8 percent above the 10-year average.

Or look at California’s sluggish housing development this way, considering all the legislation and money that has been poured into the state lately: In the first half of 2024, the state accounted for 6.8% of all U.S. building permits, compared to an average of 7.7% over the past decade.

Jonathan Lansner is a business columnist for the Southern California News Group. Reach him at [email protected].