The year 2020 was quite challenging for the construction industry across the Golden State, particularly in Southern California, where the filing of new building permits was down by about 6%. When compared to other major metropolitan areas such as Dallas, Miami, and Chicago, Southern California experienced even more of a slowdown in construction during the worst months of the coronavirus pandemic.
Construction Trends in 2020
Apartment buildings, condos, and other multifamily structures were hit pretty hard by the construction downturn of 2020. When compared to 2019, this particular segment was down by nearly 20%, which can pretty much be considered a crash. Riverside and San Bernardino were not affected as much as the Inland Empire, where residential construction experienced some of the lowest levels since the downturn of the national real estate market after 2008.
With a new administration and a new strategy to administer millions of COVID-19 vaccines each month, it stands to reason that the pace of construction will pick up in California over the next few months, but there are other factors to consider. According to data compiled by real estate analytics firm CoreLogic, existing home sales in the Inland Empire were up by nearly 10% in 2020; moreover, prospective home buyers were predominantly interested in new construction properties after the presidential election in November. Across the Southern California region, contracts for new residential construction were up by more than 50% in December 2020 when compared to the previous year.
Economic Factors for the 2021 Housing Market
There are a few factors driving demand for new home sales, and the most important is that prospective buyers feel hopeful about economic recovery in 2021. Low mortgage interest rates certainly help, but we must also consider that many of these new home buyers are acting as property investors. The history of the American economy shows that choice housing markets such as Southern California tend to heat up during periods of economic recovery. In other words, many of the home buyers signing new construction contracts now will likely sell their properties for a nice profit a few months down the line.
All in all, if you are thinking of building a custom or spec home in California during 2021, your best bet is to retain a builder now, and the same goes for a major remodeling project. Contractors are starting to get busy now, and they are bound to get even busier later this year. Contact our office today to start discussing your project.