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Los Angeles-Orange County last for new-home lots. Inland Empire No. 16

LA Daily News logo LA Daily News 5/20/2021 Jonathan Lansner
chart, scatter chart, bubble chart: Zonda data (Graphic by Flourish) © Provided by LA Daily News Zonda data (Graphic by Flourish)

“Survey says” looks at various rankings and scorecards judging geographic locations, noting that these grades are best seen as a mix of art and data.

Buzz: Frustrated Southern California house hunters shouldn’t expect homebuilders to offer much help with limited choices any time soon. Los Angeles and Orange County builders have the nation’s thinnest supply of lots to build on while the Inland Empire is middle-of-the-pack.

Source: A first-quarter study of 30 major U.S. markets, based on historic sales patterns and land availability studied by market tracker Zonda.

Details

Watching the number of lots controlled by builders — that’s the land used to build a single home — helps gauge how quickly the industry can catch up to the surprising demand for homes in the pandemic era.

A homebuying binge — spurred by historically cheap mortgages — has dramatically thinned homebuying options for existing and newly constructed residences and pumped up prices paid by the successful buyer.

L.A.-O.C. builders’ lot inventory is just 25% of what’s been calculated as a normal supply for home construction. That’s the lowest share of 30 major U.S. markets tracked. This shortfall came after a 61% drop in a year in available space to build homes, the biggest dip among the 30 markets.

In the Inland Empire, the home construction picture is slightly brighter. Riverside and San Bernardino counties had 42% of normal lot supply — No. 16 of 30 — after a 40% drop in builder’s land inventory — the seventh-biggest decline.

After L.A.-O.C., two of the biggest lot shortages were also California markets: San Diego was second-worst at 26% of normal after a 33% drop in supply (No. 19 decline); San Francisco was fifth-worst at 33% of normal after a 48% drop (second-worst decline).

Bubble Watch tracks housing risks. Read it here!

Caveat

This is by no means, just California’s problem. Nationally, lot counts are at 49% of normal levels after falling 24% in a year.

Another sign of a U.S. lot shortage is that the “strongest” market identified by Zonda — the New York-New Jersey metro area — was only at 60% of normal supply after a tiny 2% drop, the third smallest decline. Others at the top …

2. Atlanta: 60% of normal after 33% drop in supply, No. 19 decline.

3. Dallas: 58% of normal after 28% drop in supply, No. 17 decline.

4. San Antonio: 57% of normal after 1% drop in supply, second-smallest decline.

5. Denver: 55% of normal after 15% drop in supply, No. 7 decline.

By the way, the only market that grew its supply was Boise — up 15% over 12 months to 42% of normal, the 15th-ranked lot level.

Bottom line

Zonda chief economist Ali Wolf suggests patience will be required by Southern Californians hoping to get a newly constructed home as many new 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. Inland Empire sales were 2,559, up 28% in a year.

“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.”

Quotable

“L.A.-O.C. remains the main destination for those California dreaming; the issue is hurdles to providing enough homes for everyone,” Wolf says. “On the resale side, Prop. 13 offers a disincentive for existing homeowners to sell and move up. On the new-home side, geographic barriers combined with NIMBYism and regulation make it hard to get more homes on the ground.”

“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.”

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

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