In Southern California, New Homes are Rare and Costly
Source: LA Times
New home prices have soared in recent months in the Southern California region, with the median for the six-county region peaking at $538,000 in June, according to CoreLogic DataQuick. And in affluent ZIP Codes, builders are bidding up already-high land values. Overall, new homes have become all too rare and costly for the average buyer. Making sense of the story:
- A surge in higher-end projects has pushed new home prices above their pre-recession peaks, even as prices for existing homes remain one-fifth below their bubble-era highs. - In Orange County, the median new home price has topped $800,000. - Builders have piled in to pricey ZIP Codes — bidding up land costs there in the process— and polished their projects to a high gloss to woo wealthy buyers with cash or good credit.
- Projects aimed at the middle of the market remain scarce, and overall home building is off about 60 percent from a decade ago. The shortage of new lower-priced product is one factor making Southern California among the toughest housing markets in the country for middle-income families.
- While new homes have almost always sold at a premium, that premium has hit new highs this year. In January, the gap between median-priced new and resale homes in Southern California peaked at $151,000, a 41 percent premium for a new house.
- Several factors contribute to the widening price gap between new and resale homes, housing economists say. For example, competing bids drove up the cost of land in prime areas in 2012 and 2013, which means higher prices today.
- Some builders have made a conscious decision to move upmarket because they see more profit and upside in catering to wealthier consumers. KB Home is among the builders moving upmarket. The Los Angeles builder, long a specialist in entry-level homes, has shifted to more affluent, "land-constrained" neighborhoods.