- Multifamily permits in California fell 27% in 1H24, hitting its lowest level in 12 years.
- Single-family home permits surged 13%, a shift in construction activity despite overall housing permits falling 7%.
- California’s rental vacancy rate rose to 5.2%, making new multifamily projects less viable until interest rates decline.
Multifamily development in California has slowed down significantly this year, with building permits dropping by 27% in the first half of 2024, according to U.S. Census Bureau data.
The 19,035 multifamily permits filed during this period marked the lowest level in 12 years, as rising vacancy rates and economic uncertainty dampen demand for new apartment projects, as reported in Globest.
Single-Family Shift
While multifamily construction waned, single-family home builders ramped up activity. In 1H24, 31,653 single-family housing permits were filed in California, 13% higher over the previous six months and 14% above the 10-year average.
This surge is driven by low inventory of existing homes and the appeal of discounted mortgage rates offered by some home builders.
Single-family permits now account for 62% of all housing permits in the state—the largest share since 2010. However, this shift is unlikely to improve California’s housing affordability crisis, as single-family homes remain prohibitively expensive and out of reach for many potential buyers.
City by City
The surge in single-family construction coincides with rising home prices across California. In fact, 7 of the top 10 most expensive U.S. housing markets are located in the state, according to the National Association of Realtors.
Silicon Valley even set a new record in 2Q24, becoming the first U.S. metro with a median home price exceeding $2M.
Other California metros also saw double-digit price growth, with the San Francisco-Oakland-Hayward metro recording a median home price of $1.44M, up 8.5% YoY. Anaheim-Santa Ana-Irvine followed closely, with 15% higher prices, bringing the median home price to $1.43M.
California’s rental vacancy rate reached 5.2% in 2Q24, its highest level in a decade, which flattened rent growth and made it challenging for developers to launch new multifamily projects. Many are waiting for interest rates to come down before moving forward with new developments.
Why It Matters
As the housing market faces rising single-family home prices and declining multifamily construction, California’s housing affordability crisis is far from over.
The shift toward single-family homes may alleviate some inventory pressure, but the state’s need for diverse and affordable housing remains a significant challenge.
