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Residential permit activity up; nonresidential sluggish

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Residential permit activity has picked up in San Diego County, but the same can’t be said for nonresidential activity, McGraw Hill Construction reported.

McGraw Hill found that residential permit activity amounted to $50.79 million in September — about a 39 percent increase from the $36.41 million figure registered during the like month a year earlier.

The year-to-date residential increase in the county was a more modest 9 percent, going from $780.77 million in 2011 to about $853.58 billion through the first nine months of 2012.

The research also found that residential permit activity in all of California amounted to $1.03 billion in September — or about 47 percent more than the $701.56 million recorded through September of last year.

For the state, the residential total amounted to $9.15 billion through September, a roughly 30 percent increase from the $7.03 billion registered during the like period in 2011.

The latest U.S. Commerce Department new home sales statistics should offer encouragement to homebuilders.

The report said in September the seasonally adjusted annualized sales rate of 389,000 was 5.7 percent higher than August.

That effectively put the sales rate at its highest level in the past 2 ½ years.

Nationwide, there were only 145,000 new homes for sale at the end of September — a near record-low.

Given these dynamics, homebuilder sentiment has risen to its highest level in six years according to a joint report of the National Association of Homebuilders and Wells Fargo Bank.

David Warren, McMillin Homes senior vice president of homebuilding, said people have grown tired of waiting for the right time to jump into the market and are making their moves.

“Traffic and sales are up,” Warren said.

Warren did say while activity has improved and people are purchasing homes that are under construction, “we haven’t seen a lot of people buying dirt.”

McMillin, which has built thousands of homes in Chula Vista, currently has four active projects.

The 132-unit Terra Cotta project in Lomas Verdes is expected to be sold out by the end of the year, the 109-home Jacaranda at Lomas Verdes, while the 85-unit Indigo development at Lomas Verdes are projected to be sold out next year.

The 77-unit Verona at Rolling Hills single-family development is projected to be built out and sold in 2014.

Chuck Swimmer, Charco Construction president, said while he has heard about an increase in new home construction, he hasn’t seen it filter down to the home remodeling business quite yet.

“We are hearing about it, but haven’t felt a surge ourselves,” Swimmer said.

Swimmer said a lot of his competitors went away during the recession, “but those were people who shouldn’t have been in the business in the first place.”

Swimmer said his strongest period during the past decade was from about 2003 to 2007 when he had 35 to 40 on his staff.

“We now have about half that,” Swimmer said.

What has made conditions harder, Swimmer said, is new legislation concerning both asbestos and lead paint.

These requirements mean that jobs take longer and jobs can end up costing thousands of dollars more than before the regulations were in place.

“The other issue concerns houses that are 45 years and older are subject to historical review," Swimmer said. "I don’t think a 45-year-old tract house in Clairemont is historic but that’s what you have to do.”

Swimmer, whose firm also handles commercial alterations and additions, said that side of his business has felt the recession's effects, though it wasn’t nearly as pronounced as on the residential side.

On the nonresidential side in San Diego County, permits were pulled for just $41.26 million worth of construction in September, according to McGraw Hill.

Such a figure is akin to the cost of a single project in a stronger market. That September figure was a 78 percent decline from the $186.96 million recorded during September of last year.

In San Diego County, nonresidential permits amounted to about $1.58 billion through September — off about 18 percent from about 1.92 million through the first nine months of 2011.

Current nonresidential construction activity, though considerably well off its pace of the mid-2000s, is extremely varied nonetheless.

In downtown San Diego, it ranges from the conversion of the 100,000-square-foot Old Police Headquarters next to Seaport Village into a restaurant, retail and entertainment complex, to the upcoming moving in of the fences at Petco Park.

Statewide, nonresidential permit activity amounted to about $1.02 billion in September, or about 13 percent from September 2011.

McGraw Hill reported that $9.76 billion worth of nonresidential permits were pulled through September statewide, roughly 11 percent less than the $10.91 billion recorded through September of last year.

For purposes of the survey, residential permitting includes single-family, duplexes and apartments.

Nonresidential includes commercial, manufacturing and other industrial, educational, religious, administrative, recreational, dormitory and other buildings.

Unlike the Burbank-based Construction Industry Research Board, which closed its doors earlier this year, the McGraw Hill report didn’t break out figures for San Diego in the “non-building” category.

This catch-all includes a wide range of construction activity, from streets to port construction to communications networks.

Statewide this non-building activity amounted to $13.79 billion through September of this year — a 27 percent drop from the $18.87 billion figure registered during the like period a year earlier.

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Charco Construction

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7065 El Cajon Blvd.
San Diego, CA 92115

Charco Construction Executive(s):

Chuck Swimmer

  • Founder, President