The Inland Empire has never been more of a bargain, relatively speaking, for home shoppers from other parts of Southern California. But that situation may be changing fast.
In early 1996, when residential markets hit high gear after years of recession, a median-priced new home in the Inland Empire was selling for $143,990. That was $91,000 less than the median new home in Orange County at the time. But by last month, while the median price of a new home in the Inland Empire had risen to $189,900, that figure was now $182,000 less than the median price of an Orange County home.
“The gap has doubled,” said John Burns, senior managing director of Irvine-based The Meyers Group. “So we should see more residential developments coming on line.”
Little wonder that demand remains high in Riverside and San Bernardino counties.
But the flow of new subdivisions coming on line has slowed and a dwindling availability of finished lots are raising questions among developers and industry analysts about the outlook for the Inland Empire housing market.
In a year or two, observers say, OC and LA workers looking for an affordable home will either have to pay more for an Inland Empire residence, or commute yet further distances to find a bargain.
“We’re moving a little more quickly into a more mature stage in the Inland Empire than most people probably imagined,” said Steve Johnson, a partner of the Meyers Group in Corona. “Most of the easy-to-develop lots closer to Orange County and Los Angeles have been taken. Everything has been depleted in all price ranges.”
Indeed, development of new homes in the Inland Empire tailed off in the latter half of 1999.
Subdivision Slowdown
Developers blame the slowdown in subdivisions being planned to slower entitlement processes, increasing fees and fears of higher interest rates.
Some say the trend is already evident.
“Increases in demand have been able to meet our rising costs,” said Bob Evans, a land acquisitions analyst with Centex Homes. “But we don’t think that will continue. We’re starting to experience affordability issues now. Demand is still good but it’s thinning out at higher price points.”
As land within a 25-mile radius of Orange County and close to the San Gabriel Valley has been all but snatched off the market, fewer finished lots are left to be filled.
Centex says it has enough pre-purchased land in inventory to keep a steady stream of projects going for about the next two years close to OC and LA consumers.
Estimates of how much developable land reserves are really available in the Inland Empire range widely. Few disagree, however, that the push east has already begun.
“It’s a polarized market right now , the move-up market is growing, but the affordable product is being pushed out further,” said Johnson of the Meyers Group.
Dairyland Project
One option just a few miles away becoming available is an area known as the Dairyland , an old agriculture preserve and farming area. About 12,000 acres of undeveloped land has been earmarked for residential use, half of which is in Ontario and the other half in Jurupa Valley.
Costa Mesa-based Standard Pacific is already planning to take advantage of the newly opened land. It is preparing to develop 124 houses, each selling in the mid-$200,000 range. The deal, which hinges on a land acquisition still in escrow, would produce new homes ready to move into by the end of 2000.
“The Dairyland provides excellent opportunities for commuters working in Orange County and the San Gabriel Valley,” said August Belmont, division manager for Standard Pacific’s Inland Empire operations.
Grading is in progress on two other projects that would deliver almost 3,000 houses in the Dairyland area. A third project is open and selling units that is slated to eventually build 2,000 more houses.
But most of those units will be priced in the $200,000 and up range.
“Most of the Dairyland, which is still relatively close to Orange County, is going for larger-scale projects,” said Johnson. “Developers have to put their own infrastructure into place out there, so they have to build upper-end projects to help defray those costs.”
More affordable housing projects are not at a standstill, according to Whittlesey Doyle Realty Advisors’ partner Tom Doyle.
But those new developments are going up about 40 to 45 miles from Orange County, he added.
“Basically, home buyers are being pushed further east to find affordable homes,” said Doyle, whose land brokerage and consulting firm is based in Irvine. “Within the past year, the (Interstate) 215 corridor from Moreno Valley to Murrietta has started to open up with new development. And that’s going to be even more the case in the coming year , more and more developers are looking to start projects in that area.”
Municipal governments will not be willing to help defray those development costs, warned Otto Kroutil, development director for the city of Ontario.
“The new development will need to pay its own way,” he said. “That’s going to have a huge impact on the cost of new housing.”
For the immediate future, forecasts are for sales to remain within 1999’s range of 13,000 homes sold. This year, prices are expected to increase by around 4% in the Inland Empire.
“We think it’s going to stay pretty flat all of 2000,” said Burns. n
