Home Builders Predict Recovery : They Cite U.S. Reports Indicating Economy Is Easing Out of Recession
Orange County builders, citing U.S. government figures showing that January home sales grew a healthy 12.9%, said Tuesday that the moribund housing industry is poised for a dramatic comeback this year.
The figures released by the Department of Commerce and the Department of Housing and Urban Development are the latest indicator that the economy could be easing out of its recessionary doldrums. That in turn suggests that new home sales in Orange County could increase by as much as 20% in 1992, local developers and real estate analysts predict.
“By the end of the year, we will have a strong upturn,” said Keith A. Johnson, president of Newport Beach-based Fieldstone Co. “The demand is already there.”
Builders said that with relatively low interest rates and stable new home prices, even first-time buyers--who were once priced out of the new-home market--are being enticed to visit housing developments.
“My advice is that now is the time to buy,” said Kathryn G. Thompson, head of Kathryn G. Thompson Development Co. “There are bargains out there, and (home buyers) should take advantage of them.”
The national figures on Tuesday help soften a gloomier housing report that showed Orange County new home prices dropping for the second consecutive year. The fall in the median price to $283,500, down from an all-time high of $294,000 in 1989, reflects both a price reduction in larger, more expensive homes and increased sales of more affordable single-family houses and condominiums, according to an annual report prepared by the Construction Industry Research Board.
The figures show Orange County as the sixth most expensive place to live in California. Marin County tops the list with a median price for a new home of $393,500. San Mateo, Alameda, Santa Clara and Santa Cruz counties all had homes generally more expensive than Orange County’s.
But despite the glum picture painted by the research board’s report, developers and real estate experts said that as the recession wanes, the construction industry should pick up steam.
“We are probably at the bottom right now,” said Steve Johnson of the Meyers Group, a real estate consulting firm in Newport Beach. “We are seeing activity now and (the construction industry) is in much better shape for 1992.”
In response to value-conscious buyers, builders have altered their marketing strategies to offer less flamboyant architectural styles and have planned housing tracts to include a greater number of affordable houses and condominiums.
Larry Webb, president of A-M Homes’ Southern California division, said his company has begun to use focus groups to learn what sort of homes prospective buyers are looking for.
“The last couple of years has been a great learning experience for home builders,” Webb said. “Builders used to make an awful lot of assumptions about what the buyers wanted. Now we really have to tune in. We’ve gotten the message.”
Webb, whose company is currently building three projects in South County, two in Placentia and one in Tustin Ranch, said buyers no longer look for style so much as function.
Another change in buying habits is that prospective homeowners are less likely to sign on the bottom line during the first visit.
“People are shopping, and they are doing a good job at it,” quipped Kevin Kirk, president of Kaufman & Broad Home Corp.
Despite the optimism, developers said they feared that a continued lack of construction funding from banks and savings and loans may hamper the industry’s recovery.
“It’s terrible,” said Marta Boransi, a real estate consultant for Robert Charles Lesser & Co. “There’s a terrible problem with financing.”
Many developers have sought construction funding from private investors or have had to wait until projects were sold out before starting any new construction, they said. Inventories are the lowest they have been in years, which may soon start driving prices up again as demand exceeds supply.
“There is no doubt that the demand is there,” said Thompson, the Aliso Viejo developer. “But the problem (with construction financing) has still not been resolved.”
Still, developments continue to open, not with the same lines and enthusiasm that were once a common sight outside model home offices. But any sales are good news after such a long dry spell, builders said.
For instance, Kaufman & Broad has recently opened a 105-unit project in Anaheim, consisting of a mix of condominiums and attached and detached single-family homes. Since its opening day on Jan. 18, 25 units have been sold.
“We’re happy with that,” said Kaufman & Broad’s Kirk. “We think it’s exciting.”
Profile of O.C. Housing Trends Although the median price of a new house in Orange County peaked and then declined during the last five years, home size continued to grow, according to the Construction Industry Research Board. Most real estate analysts and builders say that it is an aberration, partly reflecting a sell-off in 1991 of larger homes that were cut in price to make them saleable. Here are the trends in Orange County and the 1991 prices and sizes in the contiguous counties:
O.C. Prices In dollars ‘91: $283,500 Square footage ‘91: 2,090 Price per square foot ‘91: $135.65 Other Counties
SSquare Price per 1991 figures Price footage square foot Los Angeles $245,000 1,890 $129.63 Riverside $170,000 2,010 84.58 San Bernardino $172,900 1,950 88.67 San Diego $235,500 2,045 115.16
SOUTHLAND BUILDING PERMITS
As money became harder to come by for builders, the number of permits issued for new home construction plummeted in 1991. Builders now say they resort to private investors and other forms of creative financing to build homes.
O.C. Permits Issued ‘91: 6,530 Value ‘91: $1,077 Other Counties
Permits Value 1991 figures issued (in billions) Los Angeles 16,191 $3.182 Riverside 9,271 $1.031 San Bernardino 6,835 $.804 San Diego 7,916 $1.395
PLANNED UNIT DEVELOPMENTS VS. OTHER HOUSING
In 1989, more than half of all new home sales in Orange County were in planned communities (PUDs), where homeowners shared ownership of such amenities as recreational areas, pools, greenbelts and common driveways. That number has dropped considerably as a lack of inventory has left fewer homes and condominiums with such amenities available.
1989
Single family homes: 19% Condominiums: 26.8% PUDs: 54.2% 1990
Single family homes: 27.3% Condominiums: 32.5% PUDs: 40.2%
1991
Single family homes: 31.6% Condominiums: 30% PUDs: 38.4% Source: Construction Industry Research Board
