Home developer Rancho Mission Viejo Co. has nothing to sell until next year.
Their “sold out” status says plenty about the state of the pandemic era’s housing market.
“Who could have predicted that within 60 days of the lockdown, housing would become the biggest thing?” says Paul Johnson, the Orange County developer’s executive vice president of community development.
Home prices since the pandemic’s icy bottom last spring have rocketed to record heights thanks to low mortgage rates and a shortage of places to buy — new or existing. But chances that developers can boost the housing supply are dramatically limited because buildable land remains elusive.
The number of lots in Orange and Los Angeles counties is just one-quarter of what’s needed to meet demand, says new-home tracker Zonda. It’s the thinnest inventory in the nation. And in the Inland Empire, it’s only a tad better — just under half of what’s needed.
It’s all part of the cautious approach builders have taken since the financial battering of the Great Recession. New homes represented 9% of all homes sold in Southern California in 2021’s first three months, according to DQNews. In the 20 years before 2008, builders took 16% of local sales.
At Rancho Mission Viejo, the developer knew the latest slice of its old ranch land in the south Orange County foothills — the 2,776-home Esencia community — would sell out before it could launch its next project, the 2,700-home Rienda, just across a new bridge on Cow Camp Road.
But thanks to the pandemic-fueled buying binge, Esencia — which opened in 2015 — sold out four to six months ahead of schedule, Johnson says. So the company has accelerated its efforts to get Rienda ready for sales come 2022.
“Producing lots is not an overnight thing,” he says.
Ian and Shannon Etherington are the typical 2021 house hunters: Established adults looking for more permanent housing.
She’s 35 and works in the communications field. He’s 36 and in sales. The couple, who are renters, just had their first child.
Shannon says the house hunt began a year ago when they started looking at existing homes. By fall, when they made the search more serious, nothing was exciting the couple, who both work in the Costa Mesa-Irvine area.
She admitted the heated competition among house hunters wasn’t for them. “We didn’t want to get into bidding wars,” she says. Plus, with a baby coming, the couple “didn’t want to invest in an older home” that would need work.
The Etheringtons looked at Rancho Mission Viejo, and “I was just blown away,” Shannon says.
They consider themselves lucky to have signed a contract to buy the last unsold home in Esencia — a still-to-be-completed four-bedroom, four-bathroom home in the New Home Co.’s Sterling project where prices started in the “mid-$1-millions.”
Shannon said the couple was lured by Rancho Mission Viejo’s amenities — parks, paths and community facilities — that was topped off by a cul de sac house on a street with some 53 kids in residence.
“We wanted something that we could call ours,” she said. “We pulled the trigger quickly.”
Los Angeles and Orange County builders have the nation’s smallest inventory of ready-to-go lots.
This shortfall came after a sales spurt cut local builders’ available lots by 61% in a year, the biggest dip among 30 major markets tracked by Zonda.
In the Inland Empire, a key house-hunter alternative, the home construction picture is slightly brighter. Riverside and San Bernardino counties have 42% of normal lot supply — No. 16 among the 30 markets. That came after a 40% drop in builder’s land inventory, the seventh-biggest decline.
This is, by no means, just Southern California’s problem. Nationally, Zonda says lot counts are at 49% of normal levels after falling 24% in a year.
Zonda chief economist Ali Wolf suggests patience will be required by Southern Californians hoping to get a new home as many such communities are sold out.
In L.A.-O.C., 1,729 new homes were sold in the first quarter — up 27% vs. the pandemic-scarred period a year earlier, according to DQNews. “L.A.-O.C. remains the main destination for those California dreaming; the issue is hurdles to providing enough homes for everyone,” Wolf says.
“Enter, the Inland Empire,” Wolf continued. “Riverside and San Bernardino offer more developable land and a lower price than its coastal neighbors. Builders have been hard at work to bring more homes inland, especially as work-from-home allowed people to move further from employment hubs than before the pandemic.”
Inland Empire sales were 2,559, up 28% in a year.
The swift sales pace nudged Southern California builders to file 6,482 permits for single-family homes in the first quarter, the busiest start of a year since 2007, Census stats show.
“California was a high-risk market for a slowdown in the early days of the pandemic,” she said. “Builders paused to feel out the market. That prudence limited how many homes are available today. Builders are back in full force, though, scooping up land and planning new homes that will come to market over the next 6 to 24 months.”
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at firstname.lastname@example.org
Source: Orange County Register
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