Builders’ Bet on Recession Was a Winner : Housing: New home sales continued to rebound in April, and unsold inventories have plunged.

The collective decision by Southern California builders late last year to postpone new home building in hopes of salvaging something during the worst home-buying slump in a decade appears to be paying off, a pair of new reports shows.

In Orange County and throughout the Southland, the number of new homes standing vacant and unsold has dropped significantly over the last two quarters and sales--while still well below the boom-time levels of the late 1980s--have picked up in recent months, according to a study released Tuesday by the Meyers Group consulting firm.

And builders, buoyed somewhat by this mini-surge in buying, have started securing permits for new projects again, the Construction Industry Research Board said Tuesday.

Together, the reports indicate that the single-family housing market is staging a mild recovery, said Ben Bartolotto, research director for the Burbank-based research board.

They also offer evidence that new home prices will start rising again, said Jeffrey Meyers, president of the Meyers Group in Newport Beach. “The incentives that a lot of consumers have gotten use to probably will be gone from the market by the end of the year,” he said. As inventory continues declining, Meyers said, a new round of price increases will begin as demand once again begins outstripping supply.

No one is yet predicting a runaway recovery, but Bartolotto said that Orange County builders should pull permits for about 3,300 single-family units this year if the current pace continues. That would almost equal the 3,352 permits issued in 1990.

And Meyers said he expects builders in the county to sell about 3,900 units this year--equal to total 1990 sales.

Bolstering builders’ optimism is the reduction of standing inventory.

The Meyers Group counted 2,646 unsold new homes in Orange County at the end of the first quarter, down 21% from 3,340 left unsold at the end of 1990. This is the lowest level since 1,781 units were tallied at the end of the third quarter of 1989. The county’s first-quarter new home inventory was off 9.7% from 2,929 units at the end of the first quarter of 1990.

The decline in inventory came as buyers began to snap up single-family detached homes, the report shows. Only 1,356 detached units remained unsold at the end of the first quarter, down 23.4% from 1,770 in the first quarter 1990 inventory.

The supply of unsold attached homes--row houses, town homes and condominiums--actually increased slightly from the first quarter of 1990, up 11.3% to 1,290 units from 1,159 units.

Paced by the decline in Orange County, inventory for all six Southland counties the Meyers Group surveys fell 15% in the first quarter to 19,627 units from 23,118 at the end of the year and was down 5% from the first quarter of 1990. The previous low, 17,250 units, was recorded at the end of the 1989 fourth quarter.

At the same time, the Meyers study shows, sales of new homes in the six counties rose 0.5% from the first quarter of 1990. The 12,230 closed escrows represented a 77.4% increase over 6,895 closed sales during the fourth quarter.

In Orange County, first-quarter sales of 1,982 new homes and condominiums were down a scant 0.6% from the same period a year earlier but were up 86% from 1,066 closed sales in the fourth quarter.

San Bernardino County, with a 143% sales gain from the fourth quarter, and Riverside County, with a 108% increase, led the six-county area.

“This past year we’ve seen that the Southern California market is not immune to the lows of a typical real estate cycle, especially when they are intensified by national recessionary pressures,” Meyers said. “Nevertheless, employment diversity is the key element that should ensure the continued success of Southern California as one of the nation’s strongest housing markets.”

New-Home Sales and Inventory New-Home Sales Orange County and the rest of Southern California posted a healthy gain in new-home sales during the first quarter, but the quarter’s sales were flat when compared to the first quarter of 1990. Orange County 1st qtr. of 1990: 1,994 2nd qtr. of 1990: 2,037 3rd qtr. of 1990: 1,712 4th qtr. of 1990: 1,066 1st qtr. of 1991: 1,982 Southern California 1st qtr. of 1990: 12,160 2nd qtr. of 1990: 11,639 3rd qtr. of 1990: 8,790 4th qtr. of 1990: 6,895 1st qtr. of 1991: 12,230 Inventory Inventory declined significantly from the fourth quarter. But the best news for builders is that inventory also was down substantially from a year ago. Orange County 1st qtr. of 1990: 2,929 2nd qtr. of 1990: 3,228 3rd qtr. of 1990: 3,637 4th qtr. of 1990: 3,340 1st qtr. of 1991: 2,646 Southern California 1st qtr. of 1990: 20,678 2nd qtr. of 1990: 23,014 3rd qtr. of 1990: 24,968 4th qtr. of 1990: 23,118 1st qtr. of 1991: 19,627

Housing Permits The number of permits issued for new single-family housing in the county continued an upward trend in April. However, multifamily permits declined in April from March levels and were substantially lower than in April, 1990. Single-Family Units 1990 Jan: 531 Feb: 319 March: 0 April: 302 May: 354 June: 535 July: 176 Aug: 116 Sept: 433 Oct: 292 Nov: 86 Dec: 74 1991 Jan: 72 Feb: 198 March: 415 April: 418 Multifamily Units 1990 Jan: 573 Feb: 403 March: 1,021 April: 1,352 May: 586 June: 1,705 July: 455 Aug: 377 Sept: 668 Oct: 693 Nov: 475 Dec: 248 1991 Jan: 57 Feb: 115 March: 353 April: 212 Source: Construction Industry Research Board