Dan Dunmoyer, president of the California Building Industry Assn., said one major reason for the decline is that many for-sale home builders foresaw "a massive downturn" and stopped buying lots to develop when mortgage rates soared in 2022.

Then a funny thing happened. Demand for their product didn't crater as much as expected, in large part because existing homeowners didn't want to sell and rid themselves of ultra-low mortgage rates.

"Builders kind of woke up and realized 'Oh, it's just us [selling homes],'" Dunmoyer said. "But we don't turn on a dime."

As for-sale builders restart their engines to take advantage of a shortage of listings, there are signs of improvement. During the first two months of this year, builders in California pulled 35% more permits for single-family homes than during the same period a year earlier, according to census data.

Permits for multifamily continued to decline — dropping 33%.

The diverging paths are probably due to several factors, said Rick Palacios Jr., director of research for John Burns Research and Consulting.

On a whole, single-family home builders have access to a wider source of debt that isn't as vulnerable to rising interest rates. In the single-family market, the supply shortage has also worsened and home prices are climbing.

Meanwhile, rents in many places — including Los Angeles — have dropped slightly as vacancies have risen, in part because apartment construction has been relatively robust in recent years.

"Single-family solid, multifamily weak is a pretty consistent theme across most of the country," Palacios said. "You're hard pressed to find a market where developers and investors are gung ho on apartments."

In the city of Los Angeles, developers must contend with another factor — Measure ULA.

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