Huge Project Would Help Ease Shortage

The Irvine Co.’s plan for more than 12,000 homes featuring a wide range of price tags is welcome news in a county struggling with a chronic housing shortage that figures to grow worse, analysts say.

“We have tremendous pent-up demand for housing, and this new project will help satisfy that need,” said John Burns, an analyst at the Meyers Group, an Irvine real estate research firm.

But even the proposed project, destined to become one of the Irvine Co.’s largest developments over the next 15 to 20 years, wouldn’t satisfy local demand that has been building for years, driving up prices and forcing workers to seek cheaper homes in Corona and elsewhere in the Inland Empire.

Indeed, home prices have climbed an average of more than 10% annually over the last five years, with the median price hitting a record $310,000 in October.

Despite low mortgage rates, the rising prices put housing out of the reach of first-time buyers. This, in turn, creates more demand for apartments, driving up rents.

The pace of new housing construction simply hasn’t kept up with a robust county economy that has created thousands of jobs in recent years, analysts say.

In the July-September period, for example, all new homes priced under $300,000 were snapped up before they were completed, according to the Meyers Group.

And prospects of finding a new, detached home for less than $525,000 weren’t much brighter. Only 16 had not been sold by the end of the three months--the lowest inventory level since the company began tracking the trend in 1988.

It’s a gap that is expected to widen.

Although economists expect job growth to slow early next year, easing demand mainly in the higher-end housing market, they believe the local economy should start to pick up steam again by the middle of the year.

Housing experts say it would require a sustained building effort to catch up to demand--20,000 new homes a year for several years, said Lynne Fishel, executive director of the Building Industry Assn. of Orange County, a trade group in Irvine.

“That amount of more than 12,000 will help in Orange County, but it will take a lot more for Orange County to catch up and meet its housing demand,” Fishel said.

So far this year, builders have pulled permits for fewer than 7,000 new homes, down from 10,742 a year ago. That building effort represents only a third of the homes needed to match the growth in jobs, the lowest rate among major metropolitan areas in the United States, according to the Meyers Group.

The Irvine Co. proposal will include apartments as well as detached homes, city officials said. Pricing has not been determined, but the homes are expected to have a wide range of prices.

“I don’t think there’s really much risk in a project like this,” said analyst John Karevoll with DataQuick Information Systems Inc., a La Jolla firm that provides housing market data. “Demand for housing in this area will stay strong.”