Investment Is Listed as Main Reason for Buying a New Home

The vast majority of Orange County residents who purchased new homes in the past year did so primarily as an investment and plan to live in those houses for no more than 5 years, according to a construction industry survey released Wednesday.

In Orange County, 88% of those polled in the Building Industry Research Council survey said the likelihood for price appreciation was their main reason for buying.

They also said that they expected to live in their new houses only for 3 to 5 years before trading up to bigger and more expensive homes.

“Home buyers in California have always been what I call mental Gypsies,” said Lester Goodman of Goodman Hixson & Co., an Irvine market research firm. “In other parts of the country, people don’t buy with the idea that they are going to move in 5 years. Here, people are thinking ahead. They like to think of their houses as a good investment,” he added.

Goodman was part of a panel assembled in Newport Beach on Wednesday to present the survey findings. The Building Industry Research Council, an association of Orange County development market research companies, has conducted the survey for the past 11 years to get a fix on what home buyers are looking for and what they can afford to spend.

Home buyers were polled during the months of July, August and September. The poll was limited to those people who purchased new attached and detached homes between July, 1987, and July, 1988. Of the 1,000 surveyed, 283 were from Orange County. The remainder were Riverside, San Bernardino and San Diego County residents.

A 36.6% increase in home prices over the past 12 months inspired much of the enthusiasm for housing as an investment. Strong demand and a limited supply have pushed housing prices of both new and used houses out of reach of most of the county’s population.

In the past year, experts have speculated that many Orange County residents purchased homes in anticipation of the passage of a slow-growth initiative on the June 7 ballot. The unsuccessful measure would have linked home construction to road improvement, and many people believed that it would have restricted the housing supply.

Of those surveyed, 22% said that concerns about passage of the slow-growth initiative prompted them to buy.

Interestingly, only 25% of those polled said that they chose to buy new houses to gain access to a better school district.

Part of the explanation for that is that few school districts in Orange County are considered to have a poor reputation.

Among the survey’s other findings:

Just 28% of the Orange County residents were first-time home buyers, a slight decline from 1987.

New Orange County houses had a median price of $179,000 and three bedrooms.

The median down payment on an Orange County house was $32,000, while the monthly mortgage payment was $1,311 a month.

The median first-year interest rate on a new house in Orange County was 8.7%, according to the survey results.

WHY THEY BOUGHT These factors were cited by buyers of new and existing homes in Orange County in July and August: Appreciation Potential: 86% Investment Potential: 80% Financial Security of Ownership: 73% Tax Advantages: 63% Wanted Larger Home: 61% New Design Features: 60% Better Neighborhood: 54% Household Size Change: 52% Wanted Planned Community: 45% Wanted Larger Yard: 41% Tired of Renting: 38% Community Recreation Facilities: 34% Wanted Better Schools: 25% Closer to Work: 22% Smaller Home/Yard: 15% No Answer: 2% Source: Building Industry Research Council