The Times Orange County Poll : High Home Prices Stir Fears for the Future

Orange County housing prices have climbed to such heights that a majority of residents fear that the next generation will be forced to leave here in search of homes and apartments they can afford, according to a poll conducted for The Times Orange County Edition.

With the median price of resale homes exceeding $200,000, new homes pushing $300,000 and average monthly rents topping $700, the survey found widespread agreement that it is increasingly difficult to meet mortgage and rent payments in one of America’s hottest real estate markets.

Conducted by Mark Baldassare & Associates, an Irvine public opinion research firm, the poll found that 84% of those surveyed agreed with the statement that “most children who are growing up in Orange County will not be able to afford housing here as adults.”

That concern was shared by people of all income groups. Even among the highest earners, those making $80,000 a year and more, 79% felt children growing up now may be forced to live elsewhere as adults because of the high cost of both renting and home ownership.

“This says a lot about how helpless people feel,” Baldassare said. “Today, young and old, rich and poor, owners and tenants . . . all share a belief that housing prices will push the next generation out of Orange County.”

Baldassare said the poll, which was based on interviews in June with 606 adults, suggests many residents are concerned that the county eventually will become an exclusive enclave for the rich if prices continue their upward spiral.

Perhaps because of that perception, the survey found Orange County residents surprisingly liberal on such issues as the homeless, rent control and the need for government intervention to provide affordable housing.

Consider some of the statistics contributing to this anxiety:

- The median price of existing single-family homes in Orange County jumped to a record $211,038 in June, up 24% from a year earlier, according to the California Assn. of Realtors. The statewide median price was $167,428 in June, while the nationwide median was $90,600.

- New houses cost even more, with the median price in Orange County hitting $276,000 in the second quarter, according to the Meyers Group, a real estate consulting firm in Corona. That represents a whopping 24% increase from the first quarter.

- According to a recent survey of new condominium developments in Orange County, the average condo price was $169,154 and the median was $146,990. Condo prices, another survey found, are increasing even more rapidly than single-family home prices.

- The Realtors association said a combination of sharply higher housing prices and rising mortgage rates have put the typical single-family home beyond the reach of all but 20% of Orange County’s households in June.

- Based on the county’s median sale price of $211,038, a typical family would have to earn a minimum of $65,559 a year and would still have a monthly mortgage payment of $1,639.

Sanford R. Goodkin, executive director of real estate consulting with Peat Marwick Main & Co., has studied the Orange County housing market for years and is alarmed by what he sees.

“There is a growing chasm between the haves and the have-nots, and we’re not talking about the homeless,” Goodkin said.

“We’re talking about the guy who thought that he was middle class and finds out that he’s not because he can’t afford to buy a house. That is almost revolutionary.”

Real estate agents tell of cash deals for $500,000 homes, property doubling in value over a few months and homes regularly selling for the asking price and higher.

That’s if you can even find one.

Some young couples have already given up and moved to new, lower-priced housing tracts in Riverside and San Bernardino counties, adding hours to their commute to jobs in Orange County.

Renting to Save

Other dual-career couples who don’t want to leave Orange County but can’t afford housing here bide their time as renters while they try to scrape together enough money for a down payment. Their incomes average more than $30,000 a year, more than enough to buy a home in other areas of the country.

While both the median mortgage payment and the median monthly rent were $715, the survey showed that renters have considerably less income and have a harder time making ends meet than homeowners. Homeowners also were generally older and much more affluent than renters, the poll found.

Moreover, nearly three in every five renters said they rented because they simply could not afford to buy a home, while 40% of the renters said they gave up luxuries and 29% went without necessities because of high housing costs.

Homeowners who bought their house in the past two years similarly experience some strain because 53% pay a monthly mortgage of more than $1,000. Nearly half say more than one adult in their household has to work to make the monthly housing payment despite $50,000-plus incomes.

By contrast, long-term owners show fewer signs of financial strain from housing costs. Only 19% of the people who have owned homes for 11 years or more said they needed more than one salary to make ends meet.

Liberal Leanings

An apparent outgrowth of the frustration so evident in the poll is an uncharacteristically liberal attitude on housing policy issues such as the care of the homeless, rent control and affordable housing.

“Despite their reputation for fiscal hard-heartedness, Orange County residents show a surprising amount of awareness of and sympathy for the plight of the homeless here,” Baldassare said.

Seven out of every 10 people surveyed agreed that homelessness is either a “big problem” or “somewhat of a problem.”

Moreover, 43% took the view that the state and federal government should be responsible for helping people who cannot afford housing, while 12% said it should be left to private charities and churches. Only one in eight felt that taking care of the homeless is “no one’s responsibility.”

However, residents seem less generous when it comes to the homeless living next door. When asked if they would oppose a homeless shelter in their neighborhood, 52% said they would, 37% said they would not object and 11% had no opinion.

By an even greater margin, survey participants indicated they would favor forcing builders to provide affordable housing for various income levels in their new developments.

Worries About Future

Taken together, the poll responses “speak to people’s fears for the future,” Baldassare said. “Orange County residents believe homelessness is a condition that could strike someone close to them.”

Rapidly rising housing prices have proven a dilemma for many people who might otherwise consider themselves middle class.

With wages rising an average of about 5% annually compared to a 24% increase in the price of a typical home over the past 12 months, many potential buyers have been unable to stay abreast of surging prices. Worse, they find themselves losing ground in their efforts to come up with even the down payment.

Consider Douglas Hart, a 34-year-old management information systems director for a flat-glass maker. He earns $55,000 a year but has found it impossible to save enough for a down payment. Hart is so discouraged that he and his wife and two daughters may even leave Orange County if he can find work elsewhere.

“I make more than my father ever did,” Hart said. “I thought by the time I got to what my dad was making, I would be able to afford a house with no problem. That isn’t what happened.”

Haves and Have-Nots

The result is a widening gulf between those who have been lucky enough to get a foothold in the market and those who seem locked out.

Lily Hawkins, 65, and her husband make a $259 monthly mortgage payment for a three-bedroom Garden Grove home they have owned for the past 14 years. But like others, they worry that their children will be forced to leave the area.

“I have four kids, and all but one rents,” Hawkins said. “I don’t know how they’ll ever buy a house. They’ll have to go out to Riverside County or win the lottery.”

As for the future, analysts note that recent increases in interest rates should cool the market by making borrowing more expensive.

In fact, that process may have begun already in other parts of the state. According to the California Assn. of Realtors, sales of existing homes declined 8% statewide from May to June.

But in Orange County, resales surged 25% over the same period, and some experts believe sales will remain strong through the end of the year.

Prices Keep Rising

They say the county’s exploding population and attractive business climate will keep the demand for housing high, and that means prices will continue to rise.

Goodkin, the Peat Marwick housing expert, said the boom is powered in part by “the perception by a lot of people that this may be the last time they can afford to buy. This has lighted the speculative bug again. This is not healthy for the market. It accelerates the velocity of inflation,” he said.

“What happens is that the prices of 1990 become the prices of 1988.”

Ken Agid, an analyst with the Marketing Department, a consulting firm, said his studies showed that Orange County will continue to suffer from a lack of housing well into the 1990s.

Based on a forecast that looks at population growth, age and new jobs, Agid said the county could support between 13,000 and 22,000 new housing units a year over the next decade. That level of demand outstrips the ability of government and developers to build the homes and the required roads, schools and support services.

Consequently, builders plan to add only about 7,500 new housing units a year (excluding rental apartments) over the next 15 years, he said.

The resulting demand-supply imbalance will cause the price spiral to continue, with existing homes increasing in value at least 10% a year for the next 15 years.

Already, Agid said the “threshold price” of a new detached home in Orange County--the lowest price of a home built in any significant volume--is approaching $200,000.

“Within two years, that threshold level may move to $250,000, and safely within five years you won’t see the minimum price of detached homes below $300,000,” he said.

ORANGE COUNTY HOUSING MARKET AT A GLANCE

About the Poll

The Times Orange County Poll was conducted by Mark Baldassare and Associates, an Irvine-based public opinion research firm, with field work by Discovery Research Group.

The survey of 606 Orange County adults was conducted June 15-18 on weekend days and weekday nights, using a random sample of listed and unlisted telephone numbers. An equal number of men and women were interviewed.

The margin of error is plus or minus 4% at the 95% confidence level. That means it is 95% certain that the results are within four percentage points of what they would be if every adult Orange County resident was interviewed. The sampling error for the subgroup of 409 homeowners is plus or minus 5%.

Housing: The Future Outlook “Children growing up in Orange County will not be able to afford housing here as adults.” All Residents Agree: 84% Disagree: 11% Don’t know: 5%

Agree Disagree Don’t Know Homeowners 83% 12% 5% Renters 86 9 5 By Age 18-34 88 9 3 35-54 79 16 5 55 or older 83 10 7 By Yearly Income Under $20,000 87 8 5 $20,000-39,000 86 9 5 $40,000-60,000 83 13 4 $60,000-80,000 86 10 4 Over $80,000 79 16 5 By Region North County 85 10 5 South County 82 13 5

Source: Times Orange County Poll, June, 1988

Homelessness

“How much of a problem is homelessness in Orange County?” A big problem: 27% Somewhat of a problem: 43% A small problem: 21% No problem at all: 9%

Renters

“Are you renting because you cannot afford to buy a home?” Yes: 58%

No: 42%

Rent Control

“Local governments should control the amount of money that landlords can raise housing rents each year.” Agree: 61% Disagree: 30% Don’t Know: 9%

Affordable Housing

Builders should have to provide ‘affordable housing’ for people at various income levels in their new developments. Agree: 64% Disagree: 28% Don’t Know: 8%

NOTE: Percentages may not add up to 100% because of rounding.

Source: Times Orange County Poll, June, 1988 Median Sales Price of Existing Homes

Median Sales Price

June 1988 Orange County: $211,038 S. F. Bay Area: $209,687 Los Angeles: $182,364 California: $167,428 San Diego: $147,605 Riverside/San Bernardino: $108,567 United States: $90,600 Source: California Assn. of Realtors Affordability Index for Existing Homes The affordability index is based on average interest rates for fixed and adjustable 30-year mortgages and the median selling prices of previously owned homes. The index assumes that buyers would make a 20% down payment.

Affordability Index

June 1988 United States: 47% Riverside/San Bernardino: 42% San Diego: 26% California: 25% Orange County: 20% Los Angeles: 19% S. F. Bay Area: 13% Source: California Assn. of Realtors The Top Markets

Median sales price of existing single family homes, ranked by metropolitan area. Not seasonally adjusted, in thousands of dollars

Metropolitan Area * First Quarter 1988 1. Honolulu $188.4 2. New York/Northern New Jersey/Long Island 187.0 3. Orange County (Anaheim/Santa Ana MSA) ** 183.8 4. San Francisco Bay Area ** 178.8 5. Boston 176.9 6. Hartford 166.4 7. Los Angeles Area ** 159.9 8. San Diego ** 134.4 9. Washington, D.C. 132.4 10. Providence 123.3 11. Riverside/San Bernardino ** 95.5 12. Chicago 92.8 13. West Palm Beach/Boca Raton/Delray Beach 91.5 14. Seattle/Tacoma 88.2 15. Albany/Schenectady/Troy 87.0

* All areas are metropolitan statistical areas as defined by the US Office of Management and Budget. They include the central city and surrounding areas.

** Provided by the California Assn. of Realtors

Source: National Assn. of Realtors