Housing Crunch
After running up against rising home prices, droves of Southern California home buyers are heading inland into bone-dry valleys and wind-swept desert areas in search of affordable new housing.
Refugees from Orange County’s overheated real estate market are snapping up newly minted tract houses in neighboring Riverside and San Bernardino counties, where new-home sales this year have jumped by about 50%. In Valencia, a giant master-planned community north of Los Angeles, construction will soon begin on executive-style new homes in the $600,000 range. Near the town of Perris--more than 60 miles east of downtown Los Angeles--a developer is planning a 4,000-home community.
“It’s coming like a wave,” home builder Randall Lewis said of the demand sweeping inland. “It’s hitting Corona. It’s hitting Chino Hills. It’s beginning to hit La Verne.”
The surge inland is expected to get even stronger as the regional population grows an expected 43%, to 22.35 million, by 2020. Further driving the growth is a reduction in home building in most parts of Los Angeles and Orange counties caused by a scarcity of available land, high costs and anti-growth sentiments.
Despite concerns about increased suburban sprawl, the housing crunch along the coast will push most of the future growth into inland areas, including Riverside, San Bernardino and northern Los Angeles counties, according to real estate and urban planning experts.
“The pressures are so great that you will see [demand] spill over all the way to Rosamond,” housing consultant Kenneth Agid said of the Antelope Valley town near the Kern County line. “The low-priced homes in the $150,000 range in Palmdale and Lancaster will not be available in three to five years.”
The dramatically lower housing costs found in inland communities have proved hard for many residents to resist despite the prospect of mind-numbing commutes that haunted the last generation of home buyers who headed for Moreno Valley and Palmdale during real estate boom of the late 1980s. For example, a new home in the Riverside County community of Corona sells for about $100,000 less than a comparable property in Orange County, according to real estate experts.
The huge difference in price convinced Jeff Gallifent, an Orange County native who lives a short bike ride from the beach, and his wife, Anissa, to house-hunt in Corona. There, for $170,000--the price of an Orange County condominium--the Huntington Beach couple purchased a new house with four bedrooms and a sideyard big enough to park an RV. It should be ready soon.
“The move from the beach is a tough one. I have lived my whole life here,” said Gallifent, a 31-year-old computer products salesman. “But the house is more important.”
Demand Starts a Scramble for Land
The eastward migration by home buyers like the Gallifents finds builders and developers--as well as speculators--scrambling to buy land far from central urban areas. For example, in Murrieta, where many residents commute 35 miles or more to San Diego, some building lots have doubled and even quadrupled in value over the last 18 months.
“They are fighting for dirt out there,” said land broker Craig Atkins.
A few miles north of the desert retirement community of Sun City, near the small town of Perris, Lennar Homes Corp. plans to build as many as 4,000 homes, said Emile Haddad, president of Lennar Communities, the company’s land development division.
The return of development to the urban fringe has raised concerns about increased traffic, pollution and the loss of open space.
“There is an environmental and social cost relating to this sprawling, dispersed type of growth,” said Joe Carreras, manager of comprehensive planning for the Southern California Assn. of Governments, a regional planning organization. But, that “apparently is the favored route to getting your own backyard.”
During the last year, much of the demand for new housing has been in western Riverside County and the Santa Clarita Valley, which are closest to such economic boomtowns as Irvine and Thousand Oaks--regions where jobs are plentiful but affordable homes are not.
In the Santa Clarita Valley, sales have been running 35% more than last year and prices started to climb last fall, said Thomas L. Lee, president of Newhall Land & Farming Co., which developed Valencia.
“Next year will be phenomenal,” said Lee, who expects prices to rise an additional 10%. “It will be the strongest year we will have seen in the last 10 years.”
After looking at homes in Ventura County, Teri Conahan, a 43-year-old insurance appraiser, discovered she could afford a larger house in Valencia, where early this year she purchased a two-story, 1,600-square-foot home with a Spanish-tile roof for $198,000. Prices have risen swiftly since she moved in, with a similar home recently going on the market with an asking price of $258,000.
“I’m really impressed,” said Conahan of her house. “I got more for my money [compared with] what Simi Valley and Thousand Oaks had to offer.”
At NorthLake, a housing development near Castaic that was dormant during the recession, tractors are tearing up and reshaping ranch land for 290 homes.
“The demand has just skyrocketed,” said NorthLake General Manager Matt Breiner. “The market is allowing us to do this.”
Even in the high desert of the Antelope Valley, where thousands of new homeowners fell into foreclosure during the 1990s, Kaufman & Broad Home Corp. said it plans to start grading land this fall for the first phase of City Ranch, a massive development in east Palmdale. The 5,000-home project will be designed to appeal to buyers priced out of Los Angeles and the San Fernando Valley.
Barring an economic slowdown, “I think price appreciation in Los Angeles is just starting to take off,” said Robert Scanlan, who heads Kaufman & Broad’s Greater Los Angeles division. “That’s going to create an affordability [problem] for first-time buyers and for buyers looking for larger housing.”
Projects Go From ‘Busted’ to Bustling
The inland housing surge has been most dramatic in western Riverside and San Bernardino counties, where new homes are a bargain compared with those in Orange County. In June, the median price of a new Orange County home had soared to $332,000, according to Acxiom/DataQuick Information Systems. That same month, the median price for a new home in Riverside was only $170,000.
Along the 15 and 215 freeways that cut through the area, magenta banners and giant billboards have sprouted from brush-covered hillsides to herald developments with names such as Tuscany Hills, Shenandoah and Mirageo. Trucks loaded with doors and roof trusses whiz down narrow country lanes that widen suddenly in front of the new strip shopping center.
“There were a lot of busted projects that were just sitting there [that are now] being developed,” said Michael Meyer, a consultant with E&Y; Kenneth Leventhal Real Estate Group.
In Stonehurst, a development near Murrieta, sales representative Shawna Gelberg will be moving to a new assignment after all but two of Stonehurst’s 59 homes sold in less than five months.
“A couple of years ago, if I had to sell a community this size, I think I would have been here a year” before moving on, said Gelberg, who will soon be hawking homes in Corona.
Only a few miles east of Orange County on the 91 Freeway, Corona is the first stop for many coastal residents searching for affordable homes. Despite price hikes of as much as $20,000 in the last nine months, there is still a large supply of new homes in Corona for less than $200,000.
The construction of new toll roads in eastern Orange County is expected to make Corona more readily accessible to Irvine, Costa Mesa and other major centers of coastal employment.
“Our buyers are buying on the expectation that those [toll roads] will shorten their commute to central Orange County,” said Dale Meredith, a division president of Western Pacific Housing Corp., which has seen its Corona home sales triple in the first half of 1998. More than half of the buyers were from Orange County.
Late last month, a harried Lianne Charton, a 37-year-old insurance administrator from south Orange County, was preparing to move into the $175,000 home she had purchased months before it was completed. The 2,400-square-foot home would have been way out of her price range across the county line, she said.
“I’ve waited nine months to get to this point,” said Charton, as she grabbed her house keys from the home’s saleswoman and dashed away to enter her new residence.
As demand has soared, so have Corona land values. The same empty lot that would have sold for $55,000 last year now easily commands $90,000, said Scanlan at Kaufman & Broad. That ultimately will result in higher homes prices.
Dairy Lands Give Way to New Frontier
Developers are now staking out new projects as prices in Corona rise and land grows more scarce. Many are headed north of Corona, where busy Hammer Avenue narrows from six traffic-choked lanes into a country road that slices through the heart of Southern California’s dairy lands.
The feed lots packed with black-and-white Holsteins, hay bale towers and dense stands of feed corn are destined to one day give way to developers. Some dairy and farm owners have seen offers for their lands balloon from $60,000 per acre to $100,000 in less than two years. Construction, in fact, has already begun on some dairy land housing projects.
At the intersection of Hammer and Limonite avenues, Lewis Homes has broken ground on Cloverdale Farms, a new development of more than 500 homes. Nearby, a huge master-planned community is in the works, said Steve Johnson, a partner in Meyers Group, a new-home consulting firm.
“We are looking at thousands of homes . . . emanating from this location,” Johnson said.
At the Western Sky Dairy, where a herd of 1,500 Holsteins produce 10,000 gallons of milk a day, Manager Cal DeJager watched as giant earthmovers rolled across the Lewis Homes site. It will only be a matter of time, and money, before the owner of Western Sky sells out and relocates the dairy, DeJager said.
“If the offer is good enough, we will probably move,” DeJager said. “That’s what the future holds for us.”
* AFFORDABILITY GAP: Dearth of new homes is putting ownership out of reach for many. A1
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What $175,000 Will Buy
Home shoppers with about $175,000 to spend will quickly discover that their money will go much further if they head inland. The same amount buys a small condominium in Santa Monica or a new four-bedroom house in Corona.
Los Angeles County
City: Santa Monica
Price: $175,000
Median price: $439,500*
Type: 33-year-old condominium
Size: 950 square feet
Bedrooms: Two
*
City: Los Feliz
Price: $176,000
Median price: $255,000 (Downtown Los Angeles/Central city)
Type: One-story bungalow
Size: 1,004 square feet
Bedrooms: Two
*
City: Valencia
Price: $177,990
Median price: $212,500
Type: Two-story townhouse
Size: 1,433 square feet
Bedrooms: Three
*
City: Northridge
Price: $174,990
Median price: $268,000
Type: 41-year old recently remodeled house
Size: 1,413 square feet
Bedrooms: Three
*
City: Quartz Hill
Price: $174,900
Median price: $82,000 (Palmdale)
Type: 11-year-old home on quarter-acre lot
Size: 2,700 square feet
Bedrooms: Four
Orange County
City: Anaheim Hills
Price: $176,900
Median price: $176,250 (for Anaheim)
Type: Two-story townhouse
Size: 1,210 square feet
Bedrooms: Three
*
City: Garden Grove
Price: $175,000
Median price: $170,750
Type: 44-year-old one-story house
Size: 1,138 square feet
Bedrooms: Three
*
City: Irvine
Price: $174,900
Median price: $272,000
Type: Condominium
Size: 981 square feet
Bedrooms: Two
Riverside County
City: Corona
Price: $173,990
Median price: $154,750
Type: Two-story home
Size: 1,885 square feet
Bedrooms: Four
*
City: Wildomar
Price: $175,990
Median price: $151,750
Type: Two-story home
Size: 2,704 square feet
Bedrooms: Five to eight
*
City: Menifee
Price: $174,900
Median price: $118,000
Type: Detached house on quarter-acre lot near lake
Size: 2,140 square feet
Bedrooms: Four
*The median home price for July includes prices for housing, condominiums and new homes.
Source: California Assn. of Realtors
Where Latinos and Asians Are Buying
On The Map
Like the baby boomers in the 1970s, many Latino and Asian immigrants are now entering their prime home-buying years. As their length of residency and wealth increase, they will be driving the housing market for years to come. So far this decade, their home buying has dramatically altered the makeup of communities in Los Angeles and Orange Counties. This map, based on surname analysis, highlights areas where Latino and Asian buyers, many of whom are immigrants, have boosted their share of homeownership by at least 7% from 1990 to 1996.
Homeownership Increase, 1990-96
Areas where Latino or Asian homeownership has increase by 7% or more (by ZIP Code, by ethnic group)
Source: Nancy Bolton, UCLA
