Comeback Predicted for the Large Family Home : Housing: A Chapman College forecaster also says that most of the county’s population growth over the next five years will be internal--the result of births outnumbering deaths.
Although they are out of favor in the current real estate slump, the day of the roomy family home and the upscale executive manse is far from over in Orange County, a prominent local economist said Monday.
Developers are lowering prices on existing large homes and building smaller, less-expensive units to woo back buyers who have fled the high-priced market. But the county’s traditional three- and four-bedroom homes with family rooms and three-car garages will make up the bulk of the market when the slump ends, according to James Doti, Chapman College economic forecaster.
Doti’s prediction runs counter to current thinking in a county where builders who specialize in big, expensive homes costing $300,000 to $500,000 have seen sales grind to a halt. The Chapman College researcher’s forecast is based on a study of population growth trends.
“Population growth in the county peaked in the 1980s, and we still have had demand for a broad range of housing,” said Penelope Eaton May, president of the Eaton Group in Laguna Niguel. “I don’t think all the 18- to 35-year-olds in the county are going to dash out to Perris (in Riverside County) to buy $135,000 homes.”
There always will be a certain number of people willing to trade bigger homes in outlying areas for smaller, slightly more expensive homes in Orange County in order to avoid “horrendous commutes,” she said. And that will create a steady demand for smaller homes in the $200,000 to $250,000 price range.
But Doti--who delivered his message in a speech Monday night at a county Building Industry Assn. dinner--says his prediction is solid. “If you look at the numbers, it is incontrovertible,” he said in an interview before his talk.
Doti’s research concluded that nearly all of the county’s population growth for the next five years will be internal--the result of births outnumbering deaths.
At the same time, the projections show the number of residents ages 25 to 34--the group most likely to become first-time home buyers--will shrink for the first time ever.
Overall, Doti predicts that natural increases will add 187,000 people to the county’s population by the end of 1995, while migration--mainly from Latinos and Asians--will add only 48,500 residents. At the same time, the 25-to-34 age group will shrink by 35,600.
This massive shift in the makeup of the county’s population is due in large part to the high price of housing here--an economic wall that cannot be climbed by most first-time buyers and even many homeowners who move to the county from other parts of the United States. In its most recent study of Orange County home prices, the California Assn. of Realtors said that only 20% of the county’s residents could afford the $231,249 median-priced resale home.
A result of the population shift, Doti said, is that those seeking lower-priced housing will be virtually eliminated from the local new home market over the next five years.
What entry-level homes there are, he said, will mainly be resales offered by county residents moving up to bigger or fancier homes.
He predicted that the move-up market will need nearly 69,000 new homes by 1995 to satisfy demand created by internal population growth. Migration into the county will create demand for only about 18,000 new homes over the five-year period.
The major market for starter homes and apartments for young, middle-class families and singles who work in Orange County is likely to end up concentrated in Riverside and San Bernardino counties, he said.
In addition to his residential market predictions, Doti said Monday that he believes that a slow but steady increase in the number of jobs in the county over the next five years will combine with a continued slowdown in commercial and industrial construction to bring balance back to that overbuilt market.
By 1995, he said, the office-vacancy rate in the county should be down to about 12% from the current 23% rate. Developers will be building about 1.8 million square feet of new commercial space each year by mid-decade, contrasted with an average of 4.2 million square feet a year during the last half of the 1980s.
More Homes Than Buyers After 10 years of shortage, the housing market is expected to enter a period of surplus as lower net migration and a shrinking base of first-time buyers cuts into demand. Source: Chapman Center for Economic Research ELEMENTS OF HOUSING DEMAND
For the first time in 25 years, the number of people in the first-time buyers’ age group is expected to decline in the county from 1991 to 1995. A slowdown in migration to the county is also forecast. Both factors will tend to reduce demand, resulting in a surplus of housing units.
(in thousands of units)
Source ‘71-75 ‘76-80 ‘81-85 ‘86-90 ‘91-95 Natural Population Increase 25.0 30.9 39.9 51.3 68.8 *Change in Net Migration** 68.7 54.7 27.5 30.6 17.8 *Change in 25-34 Age Group 23.8 26.9 18.6 5.8 (13.1)
** May include members of the 25-34 age group.
Source: Chapman Center for Economic Research
