Stock of Unsold Homes Drops Dramatically
Continuing a trend that began in 1985, the year-end 1988 inventory of unsold new tract housing in six Southland counties dropped to 6,597 units--down 26% from six months ago and 48% from a year ago, according to the Real Estate Research Council of Southern California.
Inventories dropped in all categories, according to Michael Carney, executive director of the Pomona-based organization.
Detached housing, 4,346 units, was down 28%; attached, 2,251 units, was down 20%; units under construction, 5,133, down 21%, and completed units, 1,464, down 38%.
Unsold Inventory
Although unsold inventory fell, the composition remained the same, with detached units accounting for 66% of the total unsold inventory, Carney said. New detached housing under construction totaled 3,774 units, accounting for 87% of the detached inventory, 74% of all units under construction and 57% of the total inventory, he added. “This is clearly a time of very low inventories in Southern California,” said Carney, a professor of finance, real estate and law at Cal Poly Pomona. “Unsold inventories totaled 21,403 units at the end of 1985, and have fallen at an annual rate of 40%-60% since then.”
The year-end survey was conducted during November and December, 1988, and January and February of this year for the Real Estate Research Council by Market Profiles.
The firm, which provides the data to the nonprofit council as a public service, surveys each active housing tract in the six-county area, interviewing sales and marketing personnel. A subdivision audit sheet is generated for each tract, Carney said.
Los Angeles County had only 1,112 unsold tract housing units at the end of 1988, a decrease of 23.5% from the 1,453 at mid-1988, the survey showed. Orange County had only 511 unsold units at year-end, but this was 57.7% above the 324 unsold units at mid-year.
Riverside County had 2,541 unsold units at the end of the year, down 16.1% from the 3,029 at mid-year 1988. San Bernardino County was down to 930 unsold units at year-end 1988, down 50.5% from the 1,878 unsold units at midyear 1988. Ventura County had only 151 unsold units at year-end 1988--the lowest of any of the six counties surveyed, a 50% drop from the 302 unsold units at midyear 1988. San Diego County had 1,352 unsold units at year-end 1988, down 27.8% from the 1,872 at midyear 1988.
Riverside County accounted for 39% of the total inventory; San Diego, 20%; Los Angeles, 17%; San Bernardino, 14%; Orange, 8%, and Ventura County, only 2%, Carney said.
Sales Elsewhere
Falling inventories were accompanied by strong sales in Riverside County, northern San Diego County, San Bernardino County, the Santa Clarita and Antelope valleys and Ventura County, he said, and by moderate sales in the San Fernando and east San Gabriel valleys and by a slowdown in sales in Orange County attributable to lack of supply.
Gordon Tippell, president of Taylor Woodrow Homes, Newport Beach, said the slowdown in Orange County sales can be traced to 1987 and early 1988.
“Builders, including us, began to get concerned about the length of the housing recovery that began in 1982, and scaled back their plans for future projects,” Tippell said.
“We didn’t want to get stuck with a lot of houses when the cycle ended. In fact, 1988 was a slower sales year than 1987, but we could have sold more houses if we had had them.”
Lack of Buildable Land
Tippell’s firm builds almost all its Orange County houses in Laguna Niguel, ranging in price from $140,000 condominiums to $500,000 single-family houses.
Another builder, Randall W. Lewis of Lewis Homes Group of Cos., Upland, said the continuing decline in unsold houses is fueled by the seemingly unstoppable demand for housing in the Southland, which in turn, is fueled by such factors as foreign investment, job growth and the lack of buildable land in Los Angeles and Orange counties.
“By foreign investment, I don’t mean just Japanese, but the whole Pacific Rim, including Chinese, Koreans and Filipinos,” Lewis said. His firm, which ranked third in the 18th annual survey of residential building conducted by The Times, ended 1988 with 60 unsold houses, based on sales of 2,300.
Asked whether the decline in unsold new housing could be attributed to an effort by builders to release fewer houses in each increment to avoid being caught with an excess inventory when sales slow down, Lewis said he doubted this was the case with most builders.
“It’s a question of what the communities will allow, what the lending institutions will permit, what our marketing experts predict,” he said. “The demand is there, but we (the home-building industry) have difficulty producing enough houses.”
Authorization Slow
A builder at the other end of the Los Angeles basin, Paul E. Griffin Jr., president of Calabasas-based Griffin Homes, said he has never seen the unsold inventory this low.
His firm, which ranked 18th in the Times’ 18th annual survey of residential building, ended 1988 with only 42 unsold units, based on 1,444 sales.
“It’s a supply-and-demand issue, with developers unable to build enough houses to supply the demand,” he said. “The entitlement process, where builders get authorization to develop a particular tract, is so slow and cumbersome that it creates an artificial shortage, a pressure-cooker situation.”
“I don’t like this trend one bit,” he added. “We’ve not only seen entry-level buyers priced out of the market, but we’re seeing move-up buyers priced out, too.”
