Read All About It: New Home Sales Are Up in “A” Areas

Another day, another headline stating “the Real Estate Market is on the Rise,” “the Real Estate Market is in the Tank,” “Foreclosures Fall for Tenth Month in a Row!,” Home Sale Prices Remain Flat,” “Best Buying Season in Years,” “Stand By for an Upward Trend.”
If you read them all, and we all do, you get the impression that the overall real estate market is in a state of “gradual recovery.” But, the “overall” real estate market is a myth. Real estate has always been about location, and if you’re in the right location, your view of how the real estate market is performing may be quite different from the daily if-it-bleeds-it-leads headlines.

In April, we asked about 40 representatives from the nation’s top home building companies to join us for Rancon's 10th Annual Merchant Builders Symposium and Roundtable Luncheon. A lot has transpired in the market during the past 10 years. Okay, that’s an understatement, but the upshot from the meeting was that for the first time in a few years, the consensus of the group was very optimistic and positive about the market, especially in what they call “A” areas of Southern California.

In fact, new homes are selling well in certain areas. The Meyers Group reported in May that sales of new homes in or near the Silicon Valley are averaging 9.3 units per month, while key areas in Southern California are averaging 6.4 units per month. They note that the fastest selling new-home projects have built-in features that attract buyers such as competitive pricing, community amenities, energy efficient components, and locations within desirable school districts.

The executives attending our Symposium supported this synopsis while discussing their next phases of new home releases in certain areas. One executive noted that “if you can find land in the primary markets, there’s no question that there is a demand for new housing.”

The big “if” is if you can find land. In a presentation called “Common Sense, the Facts Don’t Lie,” Rancon Founder and Chairman Dan Stephenson provided data on the available land for development in the four primary counties of Southern California. He said that Orange County is estimated to be 90 percent built out in terms of new home development. San Diego County is close behind at 87 percent. By contrast, Riverside County, which historically has been one of the fastest growing regions in the nation, is only about 30 percent built out.

Dan said that when you add the affordability factor — where new homes cost less than half of what they do in OC, SD or LA — the path for new growth is pointed directly at Riverside County, and especially Southwest Riverside County.

“You don’t have to have an MBA to figure this out,” says Stephenson. “The surrounding counties are nearing build out and the prices for land and homes will rise accordingly. Through the past few cycles, affordability has been the deciding factor for new home buyers and builders. In the next cycle, the most desirable place to live, that is still affordable, is in Southwest Riverside County.”

One Comment

  1. gold price

    October 3, 2012

    Vancouver’s real estate board says there have probably been “some reductions” in prices in some of its hottest markets, acknowledging the country’s most expensive city to buy a home in is now a buyer’s market.

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