Median Price of New O.C. Homes at All-Time High
Despite a significant surge in construction, the median price of new homes in Orange County hit an all-time high of $379,990 in the second quarter, a leading real estate research firm says in a report to be released today.
The price run-up, $10,000 higher than in the second quarter of 1998, came amid a 42% increase in the number of new-home sales, said John Burns, senior managing director of the Meyers Group, an Irvine-based firm that tracks trends in new-home markets.
But new-home sales, while slightly ahead of the mid-March-through-mid-June period over the last decade, falls woefully short of satisfying demand. The study underscores how wide the gap is.
The survey comes as Orange County homes have appreciated faster than those in any other metropolitan area in the nation over the last year. Builders have struggled to provide enough housing for the fast-growing county. Prices, which show no sign of leveling off during the peak home-buying season, are expected to top $400,000 by December.
“I think we could get there this year easily,” Burns said. “Obviously, median home prices will go up when no one’s building affordable housing.”
During the second quarter, 159 projects were being marketed in Orange County, a 16% increase from a year ago. Many of those developments were small in scale, built on land once used for commercial structures.
Bolstered by relatively low mortgage rates, record-low unemployment and strong consumer confidence, new-home sales jumped to 2,493 over the past three months, compared to 1,756 a year ago. Since January, Burns said, about 4,000 new homes have been sold in Orange County.
With economists predicting that Orange County will add more than 35,000 new jobs this year, about 25,000 new housing units would need to be built to meet the demand. But with Orange County’s constrained supply, “we’ll be lucky to sell 10,000 [new] homes this year,” Burns said.
Many buyers are baby boomers who were unable to move earlier this decade because they owed more on their mortgage than their home was worth. But as prices escalate, buyers increasingly are drawn into the new-home market.
Even with three large master-planned communities in South County opening this summer, and other smaller projects later in the year, the number of buyers will continue to far exceed the number of new homes available. Many home builders sell out a batch of homes within days, sometimes hours, of hitting the market.
“I’m not anticipating that we’ll have too much supply in Orange County this year,” Burns said. “Our job growth is too strong.”
Orange County’s new-home inventory remains very low, despite rising 61% from a year ago. The study shows 1,025 new homes currently on the market, the equivalent of a five- to six-week supply, based on the current sales rate. By comparison, 3,500 new homes were available in 1990 during the second quarter, a 40-week supply.
The biggest shortfall appears to be in attached homes, largely because of builders’ fears of being sued over construction defects. In California, builders can be taken to court over repairs up to 10 years after completing a project, longer than anywhere else nationwide.
So far, only 621 new condominiums and townhomes have been sold this year, Burns said, including a record-low 199 sold during the first quarter.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
O.C. New Homes
Sales
2nd quarter ‘98: 1,756
2nd quarter ‘99: 2,493
Median Price (detached homes)
2nd quarter ‘98: $369,990
2nd quarter ‘99: $379,990
