New Homes Are in Short Supply in O.C.

Orange County’s median price for a new home smashed the $300,000 mark for the first time, soaring nearly 32% over new-home prices a year ago, housing analysts said Monday.

Experts said heavy demand has caused a shortage in new homes in Orange County, where the market is so strong that it has tended to overshadow a powerful housing recovery regionwide in Southern California since last summer.

In Los Angeles County, where prices for all housing peaked at $203,000 in May 1991, March prices were up a solid 8.4% from a year earlier at $180,000, Acxiom/DataQuick Information Services said.

But in Orange County, the median price was up 14.5% at $221,000 for all new and resale housing--and closing in on the $223,000 all-time high of June 1991.

“If we see another increase next month, even a fraction of this month’s increase, the market on average will have recovered all its lost equity,” said DataQuick analyst John Karevoll.

Karevoll cautioned that prices of expensive homes have risen faster than the rest of the market, and many homes still would not sell for what they would have sold for in 1990 or 1991.

A spokesman for Orange County’s Irvine Co., California’s largest developer of planned communities, said years of job and productivity growth and low inflation have produced more affluent, confident home buyers than anyone predicted.

“Nobody forecast this kind of demand, and it takes builders a while to adjust,” Irvine Co. spokesman Paul Kranhold said. “Nobody predicted a 2.8% [Orange County] unemployment rate, and nobody predicted that the stock market would be over 9,000.”

The median price of a new home in Orange County was $301,500 in March, up 31.9% from a year earlier, DataQuick said.

Demand has wiped out so much of the available new housing in Orange County that sales fell by 5.4% in March, compared with the previous March. In all, 437 new homes were sold last month, down from 462 a year earlier. In the peak years of the late 1980s and early 1990s, more than 1,000 new Orange County homes were sold each month.

In Los Angeles County, sales of new homes rose 25.7% last month as 484 new homes were sold. In March last year, 385 new units were sold.

Stephanie Ayres, a building industry consultant at Meyers Group in Irvine, said there just aren’t enough new homes to satisfy Orange County buyers. By her count, 85 new-home projects sold out during the first quarter of the year in the county, and just nine opened to replace them.

That left about three weeks’ worth of inventory remaining for sale, she said, compared with seven weeks in Ventura County and 16 weeks in San Diego County.

Head Meyers consultant Jeffrey Meyers predicted that the average Orange County home will rise in price by 20% this year because of strong demand and short supply. Echoing often-expressed building industry complaints, he blamed city officials and government regulations for over-restricting growth.

“It’s a very efficient way to drive prices up,” Meyers said. “We just can’t supply enough homes.”

El Nino storms delayed construction projects, playing a part in cutting the supply of new homes, builders said.

“We’ve been probably affected by at least 60 days,” said William R. Watt, president of Baywood Development Group in Newport Beach, which is building homes in the $200,000 range at Tustin Ranch and Rancho Santa Margarita.

“It will probably run into the summer before everyone catches up--90 to 100 days, I would think,” he said.

With prices on the rise so sharply, questions of affordability are arising.

But California Assn. of Realtors figures show that 38% of Orange County households still earn enough to pay for a median-priced home in the county, assuming a 20% down payment. In Los Angeles County, the figure is 39%, said G.U. Krueger, an economist for the trade group.

Before Southern California’s housing bubble burst early this decade, the affordability figure was in the teens. And interest rates then were in the 9% range instead of 7%, Meyers said.

“When affordability levels get in the 20% range, it’s time to start worrying,” he said.