Rise Up Logo

Call Us Today!
(562) 659-9599

Lansner: Builders face home-shopping lull

Lansner: Builders face home-shopping lull

The 190 new homes sold in January were 41 percent fewer than a year ago – the third consecutive year-over-year drop following 26 consecutive months of gains. FILE: BRUCE CHAMBERS, STAFF PHOTOGRAPHER

It appears that Orange County homebuilders have caught a case of the homebuying blues.

The local housing market started the year with more of the same, but with a twist. According to the January report from CoreLogic DataQuick:

• Housing transactions continued to dip: January’s 1,982 home sales were 10 percent below the previous year.

• Price increases continue to erode: January’s 2.3 percent year-over-year gain in the median selling price was the smallest advance in 31 months.

The surprise twist was that Orange County builders – among the stars of the recent housing recovery – now look like laggards. My trusty spreadsheet tells me:

• The 190 new homes sold in January were 41 percent fewer than a year ago – the third consecutive month of year-over-year drops after 26 consecutive months of gains.

• In the last three months, developers have sold 902 homes – down 29 percent from the same period a year-ago and the slowest sales pace since October 2013.

Builders – minus Irvine Co. land baron Donald Bren – were late to the homebuying rebound. In 2012, for example, developer sales were just 6 percent of the Orange County market.

But with Bren leading the way, builders had moved into high gear the past two years. Hot projects in north Irvine, at the old El Toro airbase, in the new Rancho Mission Viejo, and in far north county, caught house hunters’ eyes with their modern, sharp designs. Last year, homebuilders’ share of the local market rose to 12 percent of all sales.

That sales success enabled homebuilders to raise prices – especially in a place like Orange County, where buildable land is hard to find and the inventory of homes for sale is limited, says analyst Erik Franks of John Burns Real Estate Consulting in Irvine.

Orange County’s median selling price for a new home is up 41 percent in four years, compared with a 30 percent gain for resale single-family homes, according to CoreLogic DataQuick.

The recent slowdown suggests that builders may have gone too far.

Builder prices, Franks says, “got a little bit out of control.” But don’t expect any cuts soon, he says, because developers “would rather have homes sit than discount.”

Are local new home prices too high? In January, builders sold homes at a median price of $ 798,500 – 42 percent above the overall market’s $ 562,500. From 1988 to 2014, the “premium” on new home prices averaged 24 percent.

Local developers may be hitting price resistance. The January median price for new homes was 12.4 percent higher than a year ago, but that is down from the 15 percent gains developers averaged in 2014.

Franks thinks the current new home shopping lull won’t last long. He expects that existing homes will appreciate this year by far more than builders raise their prices – giving developers renewed competitiveness.

Plus, strong economic fundamentals should keep the overall housing market on a slight upward trend in 2015.

“We are set up for a good spring season,” Frank says. “We expect a strong year … but nothing wacky.”

Market leading Irvine Co. says its year has started well, with 108 contracts signed in January to buy its new homes – up 7 percent from a year ago. That’s a strong hint the dip in new home sales could be near its end.

New home sales are very productive for the broad economy, with numerous jobs and related businesses supported by construction. So everybody should be watching to see if homebuilders can regain the magic touch with shoppers.

If not, you can expect developers to do what they hate to do: discount. And that could be bad news for the overall housing market.

Contact the writer: 949-777-6727 or jlansner@ocregister.com

The Orange County Register – News Headlines : Real Estate News