Interest in Local Building Still Sluggish
Builders’ interest in putting up new homes in Orange County remained sluggish in October, while interest in apartments and industrial buildings all but evaporated.
Overall, local builders drew permits for 315 residential units in October. But only 82 of those were for apartments--the second-lowest monthly total in two years, the Construction Industry Research Board reported Wednesday.
Benjamin Bartolotto, the board’s research director, said the October report shows that Orange County developers see a slow but steady level of interest in new homes and condominiums. But they are finding that consumers and construction lenders are turning away from apartments.
For the first 10 months of 1991, Orange County builders obtained permits for construction of 3,164 single-family homes, down slightly from 3,192 for the same period of 1990.
But permits were issued for only 2,495 apartment units from January through October, down 68% from 7,904 last year, according to the Burbank-based research board.
Only one industrial building permit--for a $500,000 project in Fullerton--was issued during October.
For the January-October period, permits totaling $34.4 million were issued for industrial construction, down nearly 35% from $52.6 million a year earlier.
Construction industry analysts say the recession and a glut of building in the late 1980s are largely responsible for the drop in all types of non-residential construction this year. The value of commercial and retail permits issued through October each were off about 38% from the previous year.
But there is no glut of apartments in Orange County to explain the steep decline in permits this year.
Instead, industry insiders say lower mortgage rates have made home buyers out of some renters, while high rents have forced others to move out of Orange County. Equally important, they say, is the reluctance of most banks and thrifts to make apartment construction loans because of tougher government rules on real estate lending.
Apartment construction requires sizable loans because the entire project must be built before units can be rented. By comparison, owner-occupied homes are usually built in phases, which means that developers seek smaller loans that lenders look more favorably upon.
The William Lyon Co.'s apartment division, for example, recently revised plans for a complex of 300 condominiums and 1,100 luxury apartments in Irvine, deciding instead to build 1,100 condos and only 300 apartments after its lender refused to issue a $150-million loan to build the larger number of rental units.