Orange County Record : Median Cost of New Home Hits $313,000

Strong demand for new housing and an increasing shortage of homes for sale pushed the median price of a new house in Orange County to a record $313,000 during the third quarter.

It was the first time that the price of a typical new home topped $300,000, said the Meyers Group, a Corona consulting firm that compiled the quarterly figures.

By comparison, the median price of a new house nationally was $112,000 in August, the latest figure available from the National Assn. of Home Builders.

“There are still a tremendous number of people in Orange County shopping for a house,” said W. Steven Johnson, a vice president at Meyers Group.

“But there’s very little out there to buy.”

Prices for new homes have risen about $10,000 a month for the last nine months, the consulting firm said. A year ago, the median price for a new house was $208,000, or a third less than this year.

The median price of a new condominium rose by a third to $146,000 from the third quarter of 1987, the Meyers Group reported.

Prices of Older Homes Rise

Prices of older houses and condominiums also are rising rapidly, jumping 32% to a median of nearly $225,000 in August from $170,000 a year earlier.

Only 17% of the families in the county earn enough to afford the median-priced older home, according to the California Assn. of Realtors, and even fewer can afford a typical new house.

In the market for new homes, three factors are pushing prices through the roof:

Good land is becoming scarcer and more expensive.

Developers are aiming at affluent buyers by building larger and more lavish homes.

So many buyers still crowd the market that builders have been able to raise prices frequently in the last year.

At Belle Maison, a Barratt American project on a Laguna Niguel hilltop, the home builder has raised prices each time it has put a few more houses on the market. Prices for the big houses went from $300,000 a year ago to the $420,000 Barratt is charging now.

Encouraged by the strong demand for lavish houses, Barratt is building even bigger houses of 5,000 square feet on a nearby hilltop.

“A year ago a lot of the houses coming on the market had 2,000 or 3,000 square feet,” said Mark L. Frazier, president of Barratt.

Who is buying all these expensive houses?

A lot of them are people who have watched their houses skyrocket in value and are now selling them in order to trade up to a bigger and better house.

And some are speculators who find they can turn a quick profit of $50,000 or more by purchasing a new house before it is built and selling the completed house to another buyer, say builders and other experts.

These buyers snapped up 2,901 new houses and condominiums during the three months ended Sept. 15, the Meyers Group said.

That was only 6% fewer than during the second quarter, when housing sales hit a record of 3,081, and slightly more than in the third quarter of 1987.

The decline in sales since the second quarter reflects the fact that there were simply fewer houses available for sale.

Buyers purchased 85% of all the new houses and condominiums offered for sale during the third quarter, up from 81% in the second quarter.

“The fact that sales dropped during the third quarter shouldn’t be seen as a decline in demand,” said S. Kelly McDermott, a vice president at Market Profiles, a Costa Mesa housing consultant.

“It only means that fewer units came on the market because everything that did come on the market this year sold in a half hour or so.”

So high was demand for houses that at the end of the third quarter only 206 houses and 291 condominiums remained on the market, according to the Meyers Group.

What’s in the future?

Builders say they are putting up houses as fast as they can, hampered only by a severe shortage of good subcontractors.

A slow-growth initiative that might have halted some home construction was defeated by voters in June, but it pushed builders to grab building permits this spring before the vote. A record 4,000 permits for housing units were issued by local governments in June, only to plummet to 1,000 in July.

Despite the high number of permits builders obtained early this year, the end result is expected to be about the same amount of home construction or a little less this year compared to previous years, according to the Construction Industry Research Board in Burbank.

Condominium construction has been on the upswing, experts say, as home buyers seek that alternative to expensive houses. Condo sales, however, slipped steeply during the third quarter by 28%, or 367 units.

HOUSING INCREASES Median prices for new homes, condos in Orange County.

Period House Condo 3rd Quarter, 1987 $207,990 $114,000 4th Quarter, 1987 217,900 133,900 1st Quarter, 1988 224,900 133,900 2nd Quarter, 1988 276,990 145,990 3rd Quarter, 1988 313,000 147,900

Source: Myers Group