Welcome to today’s real estate news roundup! In California, legislators are taking aim at construction fees to boost housing by addressing issues such as transparency and timing of fee payments. These changes aim to reduce construction costs and remove barriers to affordable housing. Meanwhile, a recent Supreme Court ruling on impact fees could potentially lower housing costs in California, providing some relief to the state’s housing crisis. On a broader scale, experts predict that the housing market will continue to face affordability constraints in 2024, despite an increase in home sales transactions. Lastly, new home construction in the US has slowed, with residential starts decreasing and building permits falling to a 7-month low. Builders are cautiously navigating the housing market amidst a leveling off in interest rates and a lull in housing demand. To dive deeper into these stories, click on the respective links below.
California Legislators Take Aim at Construction Fees to Boost Housing | KQED
After nearly a decade of trying to peel away the red tape holding back housing construction in California, legislators this year are nibbling away at the last of the low-hanging fruit: impact fees. Cities impose impact fees to fund construction for new schools, road maintenance, public art installations, and other amenities. The fees vary widely based on the type of project and city — ranging from as low as $12,000 per unit to as high as $157,000 per unit.
These fees can be significant barriers to getting homes built, and developers argue that they prevent affordable housing from being constructed. In response, a series of bills is making its way through the legislature, aiming to address issues such as transparency and timing of fee payments. While these changes may help reduce construction costs, there is still a larger conversation needed about how cities rationalize these fees and find alternative sources of revenue.
Supreme Court ruling could help lower CA housing costs | Opinion
Extremely high construction costs make it difficult for California to solve its housing crisis, but a Supreme Court decision on impact fees could lower some costs. The cost of construction in California is significantly higher compared to other states due to various factors, including the use of high-cost unionized construction labor, time-consuming environmental clearances, and arbitrary design criteria. Impact fees imposed by state and local governments also contribute to the high cost of housing.
Last week, the U.S. Supreme Court ruled unanimously that impact fees can constitute an unconstitutional “taking” of private property without compensation unless based on actual costs. This ruling could potentially reduce some of the costs associated with housing construction in California.
To learn more about the impact of the Supreme Court ruling on housing costs in California, read the full article.
Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again? – Forbes Advisor
As we head into peak home-buying season, signs of life have begun to spring up in the housing market. However, still-high mortgage rates and home prices amid historically low housing stock continue to put homeownership out of reach for many. Experts predict that the housing market will continue to face affordability constraints in 2024, with high home prices and elevated interest rates. Despite these challenges, Fannie Mae forecasts an increase in home sales transactions compared to last year, and a slower rise in home prices. While some areas may experience monthly price declines, a housing market crash is unlikely due to the strong equity position of homeowners. To learn more about the housing market predictions for 2024, read the full article on Forbes Advisor.
US home construction tumbles 14.7% to 7-month low – Orange County Register
New home construction in the US slowed last month as a leveling off in interest rates has given way to a lull in housing demand and caution among builders.
Residential starts decreased 14.7% in March to a 1.32 million annualized rate, the lowest since August, government data showed Tuesday. The figure was weaker than all estimates in a Bloomberg survey of economists.
Building permits, which point to future construction, fell to a 1.46 million rate in March. Both starts and permits were revised higher in February.
Single-family home construction dropped by the most in about three years, while the pace of multifamily starts sank to lowest since the onset of the pandemic. Permits for both also fell.
After ramping up construction in recent months, builders may be taking a breather. The inventory of new homes for sale is near the highest since 2008.
The housing starts report showed that the number of single-family homes already under construction rose to the highest since May, so builders may not be looking to break ground on more homes. Similarly, completions fell, signaling that builders are focused on current projects.
The figures represent a blemish in the nation’s recovery in the housing market. Mortgage rates have largely stabilized around 7%, and prospective buyers and sellers are only slowly coming around to accept this as the new normal.
The sentiment is similar among builders, as an industry group metric leveled off in April, citing hesitation among buyers as they try to gauge the direction of mortgage rates. Given recent robust readings on inflation and the job market, investors aren’t hopeful that the Federal Reserve is close to cutting interest rates.