Home-Buying Fever Rises to Levels Not Seen in Years
They slept in tents and minivans or lay shivering on the ground, under the blanket of a moonlit sky.
They came by the dozen to this suburban enclave, huddling overnight not for tickets to a rock concert or Super Bowl but for something far more essential:
A new home.
Within hours after the doors opened one recent weekend, every new single-family home of the 81 offered by the Fieldstone Co. was gone--with plenty of names still on a waiting list and even more buyers phoning in to see when the next phase would open.
Self-employed auto dealer Todd Vought, 34, was among the campers for almost a week.
“I wasn’t the first in line, I was the fifth in line, and I don’t hold the record,” Vought said. “One guy had been there every night for two months. He got his lot, the best in the whole development, but it took a toll on him and his family.”
Once again, home-buying fever is escalating in Southern California, where fast-rising prices and steep appreciation rates made the region a real estate mecca in the halcyon days of the 1980s--only to come crashing down in the worst recession since World War II.
Because memories of the recession remain fresh, optimism is guarded at best. Nonetheless, economists point to Orange County as the focal point of a boom in the making. The market is hot, they say--not the hottest it has ever been, but getting there.
“I’m prepared to say that Orange County is going to be the next Silicon Valley of California,” said G.U. Krueger, deputy chief economist of the Los Angeles-based California Assn. of Realtors, a trade association that represents real estate agents throughout the state.
“The trends we’re seeing in Orange County right now harken back to what we’ve seen in the San Francisco Bay Area, in Santa Clara and San Mateo counties,” said John Karevoll, financial editor of DataQuick Information Systems, an independent real estate information service based in La Jolla. “Like those areas, Orange County is an emerging center of high-tech industries.”
To narrow the picture further, south Orange County is far ahead of north Orange County or either Los Angeles or San Diego counties, experts say--and should get stronger because most of its homes fit what builders call the “move-up” or “second-home” category designed for larger families and more affluent couples.
DataQuick shows an 11.1% increase in all home sales in Orange County between June of this year and June 1996. But in south Orange County, the growth is “stunning,” Krueger said, “almost off the chart.”
Laguna Hills showed a 74.9% jump in home sales between this summer and last, according to the Realtors’ group.
The camp-out phenomenon has been experienced by other new-home developers in Orange County in recent weeks, including Lewis Homes and California Pacific. Camping out has long been commonplace in the sizzling San Francisco Bay Area, as have waiting lists, but now it has come to Orange County, and the figures suggest no letup.
Local real estate agents say the camp-out craze was common here in the late 1980s, but hasn’t been seen for at least a decade.
They also say the boom is beginning to reach other parts of Southern California. DataQuick notes that between this June and last, home sales in Los Angeles County rose 6.8% and 13.2% in San Diego County.
According to DataQuick, the median price for existing homes in Orange County jumped 4.4%--from $206,000 to $215,000--from last June.
During the same period, median resale prices jumped 2.9% in Los Angeles County, from $170,000 to $175,000, and 4% in San Diego County, from $175,000 to $182,000.
The median price for new homes in Orange County rose 6.4%, from $219,000 to $233,000, during the June-to-June cycle.
In figures released last week by the California Assn. of Realtors, Dana Point showed a sales increase of 38.2%; Rancho Santa Margarita, 29.3%; San Juan Capistrano, 25.7%; and Laguna Niguel, 35.5%, all during the June-to-June period.
Liz Morley-Smith, executive vice president of the Orange County Assn. of Realtors, said real estate agents are “staggered” by what they are seeing but wary of getting too excited.
Owners hoping to sell existing homes are, she said, finding half a dozen buyers as soon as a house goes on the market. And they’re seeing something else they haven’t seen for years: offers higher than the asking price.
“Dare I say it?” Morley-Smith said. “It’s starting to look like a seller’s market, and we haven’t seen that for five years.”
Experts credit the resurgence to low interest rates, increased consumer confidence, strong job growth and low unemployment.
But economist Krueger says it is more than that. He attributes the Orange County resurgence to a “subterranean undercurrent” between the computer-rich Silicon Valley and sister cities such as Irvine.
“A lot of high-tech seedlings that originated in the Silicon Valley are showing up in Orange County,” Krueger said.
“The Silicon Valley is running out of space. So a lot of them are coming to Orange County, which has a strong economy and more of a growth-friendly attitude.”
The problem with such a market is that it poses problems for buyers, whose five-year run of lower prices may be crashing to the finish line.
John Morris’ experience illustrates what has happened to the Orange County real estate market. Morris was cast in the role of seller when his company told him he was being transferred to Northern California.
In 1993, he bought a three-bedroom, 1,866-square-foot home in Rancho Santa Margarita that sold in 1991 for $240,000.
A year and a half later, it was appraised for $209,000, reflecting the recession’s impact.
“Its value kept dropping dramatically,” said Morris, who was surprised when he sold it recently for $222,000 after putting it on the market for $224,900--$10,000 above what his agent recommended.
“I had five people come through the first day, and that was before I even had a sign up,” Morris said.
South Orange County agent Gary Thomas said, “That kind of stuff used to go on here in the late 1980s, but I haven’t seen anything like it since then--at least, not until now.”
Thomas offered this bit of data to support what he’s talking about: In May 1996, he commonly had nine months of inventory available at all times. Now, he said, he has no more than two months’ inventory on his desk.
“In other words, based on the number of sales currently taking place, it takes us two months to exhaust our inventory--our entire supply of houses--whereas a year ago, it took at least nine months.”
Real estate agent Ginny Lavan said the rush to buy appears most frenzied in the $150,000 to $350,000 range, but even the most expensive houses are packing crowds.
“The other day, during one open house, I had 38 people walk through a place in Mission Viejo, hoping to buy this one piece of property for $429,900,” Lavan said.
Another agent “had 53 people come through in one day, trying to buy a house in San Clemente for $629,900. In the real estate business, we used to say, ‘If you get 21 people showing up for an open house, you’ve got a sale.’ ”
Though most are wary of sounding too optimistic about what appears to be a sea change in the home market, agent Lavan uttered the phrase that many are finding themselves tempted, but too nervous at this point, to say.
“What recession?” she asked. “I sure hope it’s over. . . . It’s a lot more fun this way.”
* UPS AND DOWNS: A breakdown of Southland median home sale prices according to ZIP Codes. Real Estate section
