New Home Sales Up Unexpected 11.3% in U.S. : Real estate: Growing demand in Southland has allowed most developers to discontinue sales incentive programs.


Sales of new homes across the United States surged an unexpected 11.3% last month, led by a surprising 33.8% gain in California and the rest of the western states, the Commerce Department said Thursday.

The sharp increase pushed nationwide sales to their highest level in 7 1/2 years, reaffirming analysts’ beliefs that a healthy housing market will play a key role in leading the recovery well into 1994.

But the unusually strong upswing in sales in November--typically one of the slowest sales months of the year--left even veteran analysts at a loss to explain the market’s unseasonal strength.

And as California finally joins the nation’s housing rally, many experts say that home buyers are slowly losing the bargaining power they enjoyed during the Southland’s prolonged housing slump and that developers could begin raising their prices as early as next spring.


“Little by little, we’re seeing prices firm up and (Southland) builders getting stingier when it comes to making concessions,” said Steve LaTerra, an analyst for Meyers Group, a Los Angeles-based real estate consulting firm.

“Bargains are still out there, but they’re getting harder to find,” he said.

Southland developers began slashing their prices and offering a variety of other incentives to sell their homes shortly after the market peaked about 1990. As recently as last spring, some builders were advertising discounts of more than $20,000 or cash rebates of as much as $10,000.

But sales in California have climbed in nine of the past 10 months, according to La Jolla-based Dataquick Information Systems, and the number of new homes that are sitting unsold has dropped dramatically. With supply dwindling and demand picking up, some builders have found that they no longer need to make such deep concessions to sell their homes, LaTerra said.


“There’s just no reason for us to give away the store to make a sale,” said Ira Norris, president of Upland-based Inco Homes. Inco’s sales have been growing rapidly, Norris said, and the company--which specializes in building low-cost homes for first-time buyers--has even been able to raise prices at some of its developments.

Although sales of lower-priced--less than $150,000--homes have held up relatively well over the past few years, there are signs that the market for more expensive homes is also starting to heat up.

Lonnie Schield, sales manager of Circle Residential Realty, said foot traffic at its pricey Hearthside development in Woodland Hills has jumped about 35% in the last 60 days. The company sold two new $500,000 homes at the tract in the past few weeks, after months of selling nothing at all.

“The resale market is picking up, so sellers are finally able to sell their old homes and move up to something nicer,” Schield said.

Thursday’s strong sales report bodes well for California’s builders. The Construction Industry Research Board in Burbank expects builders to start construction on 102,000 homes and apartments in 1994, up from the estimated 85,200 that were built this year.

Despite the 20% jump forecast for 1994, construction would still be about half that of the average 200,000 homes built each year in the 1980s.

“Construction in California has been down for so long that any increase would be a welcome one,” said David Seiders, an economist for the National Assn. of Home Builders in Washington.

Still, even Seiders said he was surprised that sales posted such a strong showing in the West and across the rest of the country last month.


The nation’s 807,000 seasonally adjusted annual sales pace was the highest since April, 1986. November sales were up 11.3% from October and 31.2% from a year earlier, the Commerce Department said.

The report came just one day after the National Assn. of Realtors said that resales of older homes had climbed 2.9% in November from October to a 4.21-million rate--the fastest sales pace since the trade group began keeping figures in 1968.

Taken together, the two housing reports show that total housing sales last month were running at a 5.017-million annual rate, the highest sales level in history.

Ironically, just as builders are on the eve of what they expect to be a record-setting year for housing in the United States, they are also facing a surge in lumber prices that threatens to dampen sales and push the cost of new housing higher.

Stronger home sales, combined with logging restrictions in the Pacific Northwest and a trade skirmish with Canadian producers, has pushed the price of lumber up more than 60% since July and raised the cost of building a typical 2,000-square-foot home by more than $4,000.