The increased activity mirrors what’s happening nationally, as builders ramp up after a long hibernation that saw home starts plunge to record lows.

A Chronicle analysis of Census Bureau data on housing permits – a strong indicator of future construction as 86 percent become housing starts within one month – shows that this year the core Bay Area counties are on track for more-robust home building.

The home construction market is returning to normal as it recovers from the “boom and bust carnage,” said Robert Denk, senior economist at the National Association of Home Builders.

“We definitely see that we’re on our way up off the bottom,” said Gary Mayo, group president for Northern California and Nevada at Toll Brothers, one of the nation’s largest home builders. “The market is improving across the country, with Northern California among the stronger areas. In the Bay Area, sales started to dramatically improve in January. Our sales in the Bay Area on the same (housing developments) as last year are up 100 percent this year.”

Models not even done

Toll has luxury developments in Brisbane and Sunnyvale – each of which has sold more than a dozen homes without even completing a model house.

“We have a sales trailer out in the middle of the raw land where we’re putting in the site improvements. It shows the strength of the market: People are buying off of the blueprints and our reputation,” he said. Another new site in Pleasanton opened a week ago and has taken six deposits. Existing developments around the bay in Hayward, San Ramon, Dublin and elsewhere are suddenly finding a ready coterie of buyers, he said.

Kenny and Rena Tan will pay about $1 million for a five-bedroom home in Toll’s Brisbane development called the Ridge, which will be ready in about a year. For now, they put down a nonrefundable $9,000 deposit, accounting for about half of the structural options they requested, such as converting the downstairs library to a bedroom, putting in a kitchen island and a adding a sink to the laundry room.

They like the location, near San Francisco and the airport, and picked a site with hill views, he said.

At 52, Tan said they were looking ahead to their senior years.

“We wanted a home we can retire in, with a downstairs bedroom so we don’t have to climb stairs as we get older,” he said.

As a real estate lawyer, he’s very familiar with the market, Tan said.

“I know that the worst is over; especially in San Francisco and the Peninsula there is such a strong demand for homes that it is a very resilient market,” he said. “I waited until now; no way would I have jumped in two years ago.”

What caused the turnaround?

Richard Green, director of the USC Lusk Center for Real Estate, said that a growing population’s demand had caught up with the existing supply, making it time for new homes to be built.

“We went a long time, basically five years, with almost no new construction to speak of,” he said. “In the post-World War II era we’ve never seen anything like this before, so it had to turn around.”

Biggest of all, Denk said: stabilization of the overall housing market. “Nobody will buy a house if they expect it to lose value,” he said. “The bottoming out of house prices is a critical factor enabling the turnaround.”

Low interest rates

Overall economic conditions, with growing consumer confidence and record-low interest rates, is another factor.

“I think people are tired of waiting,” Mayo said. “They’ve been sitting on the sidelines for five years wanting a new home but didn’t feel the dynamics were right. Employment didn’t feel solid. Now (they see) low interest rates, a strengthening economy and (more) equity in their existing homes, so they can sell them.”

Consider this: In both 2005 and 2006, builders pulled permits for about 15,000 new homes a year in the San Francisco metropolitan area (the counties of Alameda, Contra Costa, Marin, San Francisco and San Mateo), a little more than half of them being single-family houses and the rest apartments or condos. In 2009, just 3,550 permits were issued. By 2011 it was up to about 5,800.

Soaring past last year

As of August, builders have already taken out about 5,800 permits this year – as many as in all of last year – putting them on track to exceed last year’s total by 50 percent.

The San Jose metro area (the counties of Santa Clara and San Benito) had an even deeper plunge, going from roughly 6,000 new permits a year to only 1,100 in 2009. This year, it is on track for about 5,800 permits – almost back to its boom-time levels.

Home construction is an economic indicator that packs a hefty wallop. Building a house creates the equivalent of three full-time yearlong jobs, according to the National Association of Home Builders. About half of them are construction – the folks who swing the hammers and install the plumbing and electricity – while the other half are everything from real estate agents, mortgage brokers and lawyers to sellers of concrete, brick, masonry, steel, furniture and other goods.

The United States “was hovering at 1.4 million single-family houses being built a year, and that dropped to 400,000,” Denk said. “With 1 million fewer housing starts, that meant 3 million jobs that weren’t there because we weren’t building at a normal pace.”

From 2007 to 2011, more than 2.1 million construction workers lost their jobs, according to the Bureau of Labor Statistics. Since then, only about a quarter of a million have gone back to work in the industry.

“In a normal year, housing construction is 5 percent of GDP,” Green said. The downturn “shaved 3 percent off the GDP. When we get back to normal – and we’re still not there yet – that’s another 3 percent back of GDP, which I think everyone will welcome.”

Exurbia building

Some people predicted that post-downturn new homes would be leaner than the boom-time McMansions, but that doesn’t seem to be holding true.

“There is more building in exurbia, where land is relatively cheap,” Green said. “Developers make bigger margins on bigger houses, so that’s probably what we’re going to see.”

Patrick Duffy, principal at home-building consultant Metro Intelligence Real Estate Advisors, said he predicts that next year will see builders break ground on 800,000 to 1 million new homes nationwide, following this year’s projected 600,000.

“House building has a big multiplier effect” on the economy, he said. “That’s why we’ve been dragging along. Now housing is starting to pick up; that’s a nice annual bump. It’s really hopeful, but there’s still some economic uncertainty out there. “

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com

Article source: http://www.sfgate.com/realestate/article/Bay-Area-new-home-construction-rebounds-3986773.php

After a summer of significant monthly jumps in confidence among the nation’s home builders, fall appears to be bringing in a chill.

Builder sentiment edged up just one point in October, according to an industry association index, but credit issues still plaguing the market appear to be holding sentiment from making the final move from negative to positive.

(Read More: Are Big Home Builder Stocks Too Hot?)

“The slight gain in builder confidence this month is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets,” explained National Association of Home Builders’ chief economist David Crowe. “These are the complicating factors that make it difficult for builder confidence to reach and surpass the 50-point mark, at which an equal number of builders view sales conditions as good versus poor.”

Buyer traffic continues to improve, marking the only positive move in the NAHB’s monthly index. Both current sales conditions and sales expectations over the next six months were unchanged, both still below the positive mark. Regionally, confidence improved in all but the Northeast region.

(Read More: How to Play the Housing ‘Boom’)

Record low interest rates are bringing buyers back to the market, tempting them, but often turning them away at the same time. The rates are great, if you can get them, but a lot of potential buyers, especially much-needed first-time home buyers, cannot.

“You have to have substantial down payment. The minimum down payments are difficult,” says Jane Fairweather, a real estate agent in Bethesda, Maryland. “The people that can manage them run into appraisal problems, banks are still squirrely, so mortgage money is still an issue in the marketplace.”

That is not likely to improve any time soon. Details on new regulations in the mortgage market are beginning to leak out of the Consumer Financial Protection Agency, and while they appear to be less onerous than once expected, they are not exactly benign.

“For us the biggest issue with QM (the Qualified Mortgage rule that will be issued by the CFPB as part of financial reform legislation) remains that banks have an incentive to be more conservative in their underwriting until they are confident on how the Qualified Mortgage safe harbor will protect them from borrowers trying to avoid foreclosures by claiming that they never should have gotten the loan in the first place,” writes Jaret Seiberg of Guggenheim Securities. “This is why we believe we remain at risk for a purchase mortgage credit crunch in 2013.”

(Read More: Homebuilders Rise as Market Continues Recovery)

While credit is an obstacle to the home builders, dramatically low supply of existing homes is a near-term boon.

“October is going rather well. What I see as an interesting story is that realtor listings of existing homes keeps dropping,” notes Stephen Paul, executive vice president of MidAtlantic Builders in Rockville, Maryland. “I think the reason for this is that we are past the big short sale and foreclosure problem, and the balance of people are remaining in their homes with upside down mortgages, making their regular payments. They are not moving, not defaulting, just standing pat. That has shrunk the existing home inventory and will help the new homes market.”

CNBC Realty Check producer Stephanie Dhue contributed to this report.

Sector Watch: US Home Builders

• Toll Brothers
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• DR Horton
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• Hovnanian Enterprises
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• PulteGroup
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• Ryland Group
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• Lennar Corp
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• Beazer Homes USA
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• Meritage Homes
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• KB Home
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