Although some local builders have projects under way, such as this custom home in a 40-unit subdivision in Foxboro, permitting activity in Massachusetts fell sharply in January.

Permitting activity plunged in January as Bay State builders continued to cut back on new-home construction.

A total of 538 residential permits were issued in Massachusetts in January, 70 percent fewer than the same month in 2007.

Experts say builders have been pulling back on production because of the housing slump. Mark H. Leff, president of the Home Builders Association of Massachusetts, said January’s decline could have been weather-related. But he also noted that developers’ reaction to the sluggish market has been much swifter than the last downturn.

“You can take some good news away from these permit numbers. If you compare this recession to the last recession, the reaction of homebuilders is much healthier,” said Leff. “They were pretty astute in sensing the recession coming on and monitoring it.”

Last year’s permitting pace was 25 percent lower than 2006. In 2007, 14,874 permits were issued, down from 19,805 in 2006.

Leff predicted that permitting will continue to decline this year and hit a low point of around 12,000 permits. During the last cycle, permitting peaked at around 45,000 in 1986 and took five years reach bottom at 12,672.

“The market for new homes should bounce back a lot faster than it did last time,” he said. “We haven’t flooded the market with new inventory and there hasn’t been a tremendous amount of speculation as there has been in other places like Florida, Arizona and California.”

‘Very Conservative’

Because there are so few new homes being produced in Massachusetts, demand appears to be building for the properties that are available, according to local builders. Of the permits issued last year, 8,703, or 59 percent, were for single-family homes.

Gregory Spier, owner of Maystar Realty Corp. in Foxboro, said some of the higher-end developments are faring better than those in the lower- to mid-price ranges. Spier, who builds two to three custom homes in the $1 million-plus range, just sold a house last week and has another closing scheduled for June. His company has sold 36 homes in a 40-lot subdivision that he has been building over 10 years.

“I’m actually busy,” he said.

But Spier added that he believes permitting will continue to decline this year because it’s become more difficult for builders to obtain financing.

“The banks are very conservative right now,” he said

Alan Berry of C.P. Berry Construction Co. in Topsfield said he thinks builders have been cautious about initiating new projects.

“They don’t want to be jumping into things with the market down,” he said.

Berry said sales slowed considerably after last summer, but he’s seen a surge over the last three months. His company has sold 51 homes in Caldwell Farm, a 66-unit age-restricted community in Newbury. Five more are under agreement.

“I don’t know if that’s going to continue or not. We hope it does,” he said.