New Homes Are Bigger, Pricier--but the Selection Is Smaller
In the classic “Saturday Night Live” skit, customers at John Belushi’s Greek diner could order anything they wanted, as long as it was a cheeseburger and chips.
In Orange County’s new-home market, the menu is just about as limited: You can get anything you want, as long as it’s big and expensive and you don’t mind being put on a waiting list.
Limited selection and high prices are hallmarks of the new-housing market in Orange County. And a survey released Monday by First American Title Insurance Co. in Santa Ana points out just how little has been available to new-house shoppers--and for how much.
The survey of every development selling new, single-family, detached homes in the county found that for the 4 weeks from Aug. 9 until Sept. 6, only 175 units were available in 24 developments.
During the same period a year earlier, 620 units were available in 58 developments.
The average price of a detached home in the latest survey was a staggering $372,850, and 60% of the homes were priced at $300,000 or more.
Housing specialists have been talking for several months now about a severe depletion of the new-home inventory in the county.
The First American survey shows how supply affects price, said Mark Hoover, subdivision sales manager and an assistant vice president at First American Title.
The report shows that 974 units were under construction during the 4-week period, down 63.3% from 2,665 units under construction in the survey taken in August and September, 1987.
At the same time, the average price of $372,850 was up 61.5% from the $230,913 average of a year earlier.
“Only a small number were actually built and for sale when the survey was taken, and the small number for sale is the reason prices have escalated to the levels we are at,” said Hoover, commenting on the symmetry of the two percentage figures: supply down 63%, price up 61%.
According to the First American survey, part of the reason detached-home prices have soared in the past year is a nearly 21% increase in size, from an average of 2,068 square feet 12 months ago to the current 2,496 square feet. At the same time, however, the average price per square foot has jumped nearly 34%, to $149.38 from $111.66.
An addendum to the survey shows that about 1,500 single-family, detached homes are scheduled to be built in the next phase of 109 developments throughout the county, signaling a big increase in availability in the first half of 1989, Hoover said.
But prospective home buyers shouldn’t take that as a signal that prices will drop--at least not on a per-square-foot basis--said Michael L. Meyer, managing partner and housing specialist for the Newport Beach office of Kenneth Leventhal & Co.
“Developers are bringing product to market as fast as they can, and I haven’t seen any saturation of the phenomenal demand yet, so I don’t think we will see any rollback in prices,” Meyer said.
“What might happen is that developers could go to smaller homes or more attached housing, in an attempt to make prices more reasonable,” he said, “but the same-sized home will cost more a year from now than it does today.”
Meyer said scarcity of developable land in the county “and the cost to developers of that land and of improvements like roads and sewers, as well as the feverish demand by buyers to get in before they are priced out of market” has contributed both to the scarcity and price of new homes in the last half of the year.
“Orange County is no longer suburbia, where you can still get the dream of a detached home with back and front yard,” Meyer said. “To do that, you’ve got to go further inland, or be in the higher income ranges.”
Hoover agreed that prices are unlikely to roll back and that the next First American survey probably would show an even higher average price.
But price, he said, is overemphasized in the First American studies “because the lower-priced units in any development sell very quickly” and aren’t as likely to be picked up in a survey of units still on the market.
Hoover admitted, however, that “when the economy is real good, like it is now,” the lower-priced units often featured in a developer’s advertising are a pretty small part of the total development.
Prices in the current survey run from a low of $125,000 (only 2 units were available at that price in all of Orange County) to a high of $795,000.
For $125,000, a buyer got a 2-bedroom, 2 1/2-bath home in Santa Ana with 1,137 square feet of floor space. The price ran about $137 per square foot and included landscaping of common grounds. Buyers also had a $30-per-month homeowner association fee to pay.
At the other end of the scale, $795,000 got a 4,536 square-foot home in Villa Park. The $175-per-square-foot price bought five bedrooms, 4 1/2 bathrooms and a half-acre lot, complete with fencing, landscaping, garage-door openers and a trash compactor.
ORANGE COUNTY’S NEW-HOME MARKET
The new-housing market in Orange County is characterized by limited selection and high prices, according to a survey by First American Title Insurance Co. The September average price of a detached home was $372,850, and 60% of the homes cost $300,000 or more.
HOMES FOR SALE BY PRICE RANGE Aug. 9--Sept. 6 Over $300,000 $299,999-250,000 $249,999-200,000 $199,999-150,000 Under $150,000 HOW NEW HOMES AND PRICES HAVE CHANGED IN LAST YEAR
Sept. 1988 Feb. 1988 Sept. 1987 Average Sales Price $372,850 $257,965 $230,913 Median Sales Price $354,900 $239,900 $220,990 Average Square Feet 2,496 2,156 2,068 Average Price per Square Foot $149.38 $119.65 $111.66 Average Number of Bedrooms 3.5 3.3 3.4 Average Number of Bathrooms 2.9 2.6 2.6 Units Under Construction 974 1,820 2,655 Units Already Sold 803 1,375 2,138
% Change Year to Year Average Sales Price 61.5 Median Sales Price 60.6 Average Square Feet 20.7 Average Price per Square Foot 33.8 Average Number of Bedrooms N/A Average Number of Bathrooms N/A Units Under Construction -63.3 Units Already Sold N/A
N/A: Not Applicable Source: First American Title Insurance Co.
