Lines Form Again in the O.C. Real Estate Market
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 straight 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.
Veronica Bizon, 33, of Garden Grove knows all about those times. She and her husband quit looking for homes in 1989, after searching in vain for four years. Each time, she said, they gave way to a “feeling of utter frustration and failure.”
The homes were too expensive, or once they found the place they were looking for, they had missed it by minutes. Now, Bizon is looking again, hoping to find a new home here, which might be better for her daughter’s asthma.
“It’s starting to have the same feeling all over again,” she said with a sigh. “With the market heating up, we can feel the frustration. It drives my husband nuts. He hates the waiting, the being too late, the prices inching higher and higher the longer you look.”
Because memories of the recession remain fresh, optimism is guarded at best. But 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’s 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 Acxiom/DataQuickInformation Systems Inc., 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, the 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.
Marisela Somo, 28, just moved to Orange County, along with her husband and young child. They had come from Texas and needed a place quickly. They spent three “agonizing” weeks looking in a much more expensive market than where they’d been.
“We didn’t think we’d get anything,” Somo said, “then, suddenly one day, we got a break. We found this place [in a new development here]. Apparently, we got in at just the right time. I could feel the frustration building, but then, thank goodness, it stopped. Had we waited much longer, who knows where we’d be? It’s getting pretty intense out there.”
Acxiom/DataQuick shows a 5.8% increase in all home sales in Orange County between June of this year and June of last year. And for resales, which account for the vast majority of home sales, the increase for the same period was 11.1%. Moreover, in south Orange County, the growth is “stunning,” Krueger says, so much so the numbers are “almost off the chart.”
Laguna Hills, to name just one area, showed a 74.9% jump in home sales between this summer and last, according to the state Realtors association.
Aware of the market getting hotter, home buyer Vought was willing to camp for five nights--to buy just the home he wanted, on just the lot he wanted, in just the cul-de-sac he and his wife, Chere,longed to live with their two young sons.
Vought got in line after first getting a frantic telephone call from his wife, who told him, “Hurry, you better get over there! The next phase is about to open!”
Being self-employed, Vought had less of a problem taking off work than most of his neighbors, who slept beside him, waiting as well for the homes of their dreams.
To make the wait more comfortable, the developer served a catered meal every night, Vought said, “and a big breakfast that Saturday. And this one woman kept bringing chocolate-chip cookies for everybody.”
Steve Cameron, an executive with Fieldstone Communities, said the project the Voughts bought into--consisting of three- to six-bedroom homes ranging from 1,923 to 3,500 square feet--has sold out in each of its three phases.
Cameron credits the affordability of the units--ranging from the low to mid-$200,000s when the project opened to today’s mid- to high $200,000s--as being the primary lure.
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’s come to Orange County, and the figures suggest no let-up.
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. Acxiom/DataQuick notes that between June 1997 and June 1996, home sales in Los Angeles County rose 6.8% and a whopping 13.2% in San Diego County.
According to Acxiom/DataQuick, the median price for the sale of existing homes in Orange County jumped 4.4%--from $206,000 to $215,000--from June ’96 to June ’97.
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, home sales in Dana Point showed an 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 agents are “staggered” by what they’re 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 interest rates “still being very good, along with increased consumer confidence, the job market in Orange County picking up constantly, low unemployment and other factors.”
But economist Krueger says it’s more than that.
He attributes the Orange County resurgence to a “subterranean undercurrent” between the computer-rich Silicon Valley and 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.
Lisa Parks and her husband, Russell, went looking for a new home after their landlord decided to sell the house they were renting in San Clemente. Another “bad” aspect of the real estate crunch, according to Lisa Parks, is landlords suddenly looking to sell off rental properties.
The Parks wanted an affordable home, by Orange County standards, but it had to be in San Clemente and had to have an ocean view. Their real estate agent told them they got lucky--they were in line first.
“The people who sold it had it on the market only three or four days,” Lisa Parks said. “And luckily, we were the first couple to make an offer. After that, the competition was pretty fierce. A month later, who knows what might have happened?”
John Morris’ experience illustrates what’s 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 originally sold in 1991 for $240,000. One-and-a-half years 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 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,” he said, “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 GinnyLavan 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.”
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Housing Is Hot
Since falling into the winter doldrums, housing sales and median prices in Orange County have risen to 13-month highs. June sales were 5.8% higher than the same month last year; June’s median sale price was 2% higher. Sales and median prices for new and existing homes:
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Sales Price (thousands) June 3,726 $201
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South County Bonanza
The heaviest sales activity in June took place in South County ZIP Codes as, for the most part, did the biggest percentage increases compared with one year ago:
Most Sales In June
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City/community ZIP Sales Laguna Niguel 92677 179 R. Santa Margarita 92688 130 Mission Viejo 92692 127 Aliso Viejo 92656 116 Mission Viejo 92691 99
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Biggest June-June % Increases
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City ZIP Sales Increase Orange 92866 25 150.0% Irvine 92606 56 107.4% Irvine 92612 60 93.5% Irvine 92614 49 88.5% Irvine 92620 66 78.4%
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Source: Acxiom/DataQuick Information Systems, Inc.
