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published on November 2, 2021 - 10:54 AM
Written by The Business Journal Staff

Future home development in California will be shaped by factors including a “schizophrenic housing market,” new building codes, environmental concerns, booming inland demand and new forms of communal living.

Those are some of the trends outlined by Clovis-based California Builder Services, which specializes in preparing public reports and budgeting for builders and landowners with a specialization in homeowner’s associations (HOA). The report “5 Trends Shaping New Home Development in California” is available for download from the California Builder Services website.

In a nutshell, the inaccessibility for young people to enter the single-family housing market — which is under fire in California anyway — will drive more development in the multi-family sector, the report concludes. But higher wages and declining birth rates could give Millennials the economic wherewithal to afford mortgages as they grow their families.

The first major trend is referred to as “environmental wildcards” in the form of wildfire threat and climate change and their impact on insurance prices.

The second trend is the fluctuation of construction costs that builders saw through the summer that had lumber prices up 249% through mid-June and essential construction material up by more than 400% through mid-May compared to April 2020.

The report anticipates that construction costs will continue to fluctuate, creating a “schizophrenic housing market.”

“As a result, materials need to either be rationed or assigned to only specific priority projects — or materials are just not available at all.”

That will require some creativity and possible growth in the market for pre-fabrication of modular building materials to address labor and cost pressures.

Another trend comes int the form of updated building codes. The proliferation of solar by way of California’s single-family home solar mandate could result in some subdivisions becoming their own “energy farm” where residents can access electricity instead of the current electrical grid.

The report states that Senate Bill 9, recently signed by Gov. Gavin Newsom, essential eliminates single-family zoning in California. The law allows up to four dwellings — two duplexes or two houses with attached units — to be built on any lot that is currently in a single-family residential zone.

“Time will tell how developers react and what the impact will be, but it may allow developers to build townhouse in areas they otherwise would, and it could potentially reduce the cost to purchase a home in some areas where home ownership is out for reach for many middle-class Californians (although there are no provisions in the bill that require new housing to be affordable).”

The report also states that the inland boom that has seen record high rent and home-price increases in the Central Valley will only continue.

Those sorts of pressures could make attractive communal, co-owned living arrangements. It is referred to as tenancy in common (TIC), which is a kind of legal, co-ownership form of communal living where a buyer buys into a shared space with two or more owners who own equal shares of the properties.

“This is attractive to Millennials, particularly those who went to university and experienced dorm room living and want to maintain a sense of community and have ownership in a unit,” according to the report.

The report states that pandemic government relief programs “were able to salvage a market that could have otherwise been on the brink of another 2007-level collapse.” What we have experienced for the past year could be the once-a-decade housing market correction that analysts look for, theorizes the report.

Through the mid-2030s, the report sees steady growth in multi-family housing starts, “particularly to house a new generation of Gen Z’s ready to either rent or own a place.” With Millennials having less children than before, along with increased wages and “perpetually lower” interest rates, their ability to afford a home could improve.

“And if this trend continues, we may see new residential development climb in a few years when the constraints of the pandemic are almost fully in the review mirror and builders adapt to the demands of the next generation of homeowners.”

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