Has home construction bottomed out?

<p>Builders constructed fewer than 600 homes and apartments across the North Coast last year, the lowest number in more than four decades.</p><p>And industry officials say the outlook will stay gloomy as long as foreclosure properties and distressed homes can be resold for less than the cost of building new houses.</p><p>"If there's a second wave of foreclosures, it will push out a home-building recovery for another year," said Keith Woods, chief executive officer for the North Coast Builders Exchange, a Santa Rosa trade group.</p><p>Woods believes the home construction industry has hit bottom, and he hopes to see some improvement by the latter part of this year. But he added that "nobody will be surprised" if the better times are delayed until 2011.</p><p>The slowdown has hit builders across the North Coast. In Sonoma County, builders pulled permits to construct 406 homes and apartment units last year, down 31 percent from 2008, according to the Construction Industry Research Board, an industry-funded research center in Burbank.</p><p>Construction dropped 21 percent in Mendocino County, which issued permits for 115 housing units, while plunging 62 percent in Lake County, which issued 55 housing permits. The counts for all three counties were the lowest since such records were first compiled in 1967.</p><p>Construction has nearly ground to a halt in Santa Rosa, the largest city in the county. The city issued 94 permits for new residential construction last year, according to the city Community Development Department. In contrast, in 2005 the city issued 1,250 such permits.</p><p>The results were similar for California, which reported a total of 36,000 new home permits, also a record low. As recently as 2004, the state's builders took out nearly 213,000 permits.</p><p>The downturn has sent reverberations throughout the local economy, where the construction industry has long served as a powerful engine for growth, creating jobs and stimulating sales of furnishings and appliances. Four years ago it directly employed 1 in 13 workers in Sonoma County, according to state labor statistics.</p><p>In the boom times of 1988, builders on average were constructing 105 homes and apartment units a week in Sonoma County. Last year, builders put up only eight homes and apartment units every week.</p><p>The industry's collapse has forced many builders to downsize, switch their focus or restructure their finances. Some have turned to remodeling with an emphasis on green building projects, while others have left the business entirely. In the past two years the builders exchange membership has dropped 10 percent to about 1,600.</p><p>Nordby Construction, one of the region's largest general contractors, has seen its business plunge more than 50 percent from previous years, according to court documents. Its CEO, Wendell "Del" Nordby III, filed personal bankruptcy Monday, attempting to reorganize $52.5 million in debts and liabilities while retaining $1.6 million in assets. The Santa Rosa company did not file bankruptcy.</p><p>Builders say the challenges ahead include high building fees and tight credit for both construction financing and home mortgages. But their chief problem is the drop in existing home prices due to foreclosures and sales of other distressed properties.</p><p>"They're selling below cost," said Chris Peterson, a co-owner of Rivendale Homes in Santa Rosa. Home prices must rise 25 percent or more for construction to significantly pick up, he said.</p><p>"This is a deep hole," Peterson said, "and it's going to take a while to climb out of it."</p><p>Builders are keeping a close eye on home prices, which have started to stabilize in Sonoma County over the past year. The median price for a single-family home bottomed at $305,000 in February, down 51 percent from its peak of $619,000 in August 2005, and has since inched back up to $389,000 last month.</p><p>The number of home foreclosures in Sonoma County declined 28 percent last year to 2,025. But foreclosure counselors, analysts and banking regulators have cautioned that the crisis is far from over, and nationally could get worse this year.</p><p>Even so, California's home-building industry likely hit its low point last year, said Ben Bartolotto, research director for the construction research board. But he predicted that new construction will increase only modestly this year.</p><p>"It's just going to take time," Bartolotto said. "It's not like past recoveries where coming out of the gate you doubled everything (in terms of new homes built). This one is going to be more of a struggle."</p><p>Santa Rosa likely will see the number of building permits rise this year because of a 150-unit apartment complex proposed by the nonprofit Burbank Housing Corp. in southwest Santa Rosa, said Chuck Regalia, the city's community development director.</p><p>But the city is planning for construction to remain somewhat sluggish. The community development staff has been cut to 30 workers, down from 70 three years ago, Regalia said.</p><p>In Santa Rosa, Taylor Mountain Homes is one of the few companies still building single-family houses.</p><p>Construction started at its subdivision in the southeast section of town in the latter half of 2008. Twenty-five of the 32 homes off Kawana Springs Road have been sold, and 19 are occupied, said Aaron Matz, the company's president. Plans call for building 14 more this year.</p><p>Prices start at $339,950 and sales average a modest three homes every two months. But the company has found a market, Matz said, including with buyers who have learned firsthand about the stiff competition in the foreclosure home market and the long waits often involved with short sales. The latter refers to an owner who owes more to the bank than the home is worth.</p><p>"We do hope for a little stronger spring than last year," Matz said, "just because nobody else is selling new homes."</p><p>You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com.</p>