With California housing prices surging, developers say they can’t build enough homes

With California housing prices surging, developers say they can’t build enough homes

A new report Wednesday showed there’s no end in sight to rising home prices in California, which jumped again over the last year.

The CoreLogic report revealed prices for single-family attached and detached homes rose 5.8 percent between May 2016 and May 2017. Los Angeles County saw an even bigger bump of 6.4 percent, falling slightly short of the nationwide increase of 6.6 percent.

A shortage of available homes drove the price hikes. Developers aren’t building enough to keep pace with the demand, and it’s only going to get worse, said CoreLogic President and CEO Frank Martell.

The firm predicts that California will see a year-over-year price increase of 9.7 percent in May 2018. Residents of the state will feel the effects of escalating housing prices, both good and bad, Martell said.

“For current homeowners the strong run-up in prices has boosted home equity, and in some cases, spending,” Martell said in a statement. “For renters and potential first-time homebuyers it is not such a pretty picture. With price appreciation and rental inflation outstripping income growth, affordability is destined to become a bigger issue in most markets.”

Earlier CoreLogic figures from May show that individual cities throughout Southern California have seen far bigger price hikes.

In Canyon Country, for example, the median price in May for an existing single-family home was $609,000, up 20.6 percent from a year earlier. The 91201 ZIP code of Glendale likewise saw an 18.9 percent annual increase. The 91605 portion of North Hollywood rose 15.1 percent to $535,000.

Hawthorne’s median home price rose 18.2 percent during the same period to $579,000.

Further inland, the 91737 area of Rancho Cucamonga saw a 15.8 percent increase over the year, bringing its median price for an existing, single-family home to $611,000.

The 92614 area of Irvine saw a 36.4 percent increase, bringing its median price up to $970,000.

Bill Holman, vice president of land development for Christopher Homes and for Rosedale Land Partners, the master developer of the 1,250-home Rosedale community in Azusa, said builders are caught in a regulatory bind.

“It takes so long to bring lots to market in the current regulatory environment,” he said. “And you don’t have a lot of available land where you can generate new lots, so you’re faced with the more challenging role of recycling older lots for reuse. As you look city to city, you see they have some older warehouse uses and office buildings that are looking tired and old.”

Those, he said, can often be revamped into new in-fill housing communities.

“Fountain Valley is going through a specific plan to re-energize some of their older warehouse properties to get some new, mixed-use residential development,” Holman said. “There’s really no farmland left unless you’re in Irvine.”

Brookfield Residential is currently building single-family luxury homes in Rosedale that are priced from the mid $1 million range, and Tri Point Homes is building luxury units in the $800,000 to $900,000 range.

“There are about 150 homes left to be built in Rosedale,” Holman said. “They should be completed in 18 to 24 months.”

Robert Smith, a Realtor with Keller Williams Realty in Valencia, said prices are continuing to rise in the Santa Clarita Valley.

“We could always use more homes and that has definitely contributed to prices being strong,” he said. “Prices are going up slowly month over month.”

Smith expects that to continue as long as the inventory of available homes remains tight.

“Buyer demand has increased from people moving in from out of the area including the San Fernando Valley,” he said. “Demand for move-up homes is strong.”

The shortage of homes has fueled construction of more apartments. A recent report from RENTCafe.com shows that downtown Los Angeles added the second highest number of new apartments in the nation between 2010 and 2016.

That equated to 7,551 units that are dispersed among 35 apartment buildings. They now account for 63 percent of the total units in the city’s inner core, according to the nationwide apartment search website.

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