California sees land rush as homes market surges
San Jose, Orange County and San Diego report all sites ready for building will be sold in a year
The nascent recovery in new-home sales in the US has builders snapping up a diminishing supply of well-located, ready-for-construction land.
They added more than 18,000 lots during the most recent quarter, the biggest gain since inventory hit a low in the fourth quarter of 2009.
Along the California coast, where the technology and health-care industries are fuelling job gains, plots are selling faster than developers can prepare them.
The supply of finished lots - with permits, streets, and water and power lines, enabling construction - would fall to zero within a year in San Diego, Orange County, and San Jose, the Concord Group, a consulting firm said.
"We are running out of inventory," Richard Gollis, a Concord Group principal, said.
United States new-home sales rose in July to an annual pace of 372,000, up 25 per cent from a year earlier and the fastest since April 2010, the Commerce Department reported last week.
Land prices were expected to climb an average of 5 per cent this year and next, faster than home values, according to Paul Diggle, property economist for Capital Economics in London.
"We expect the early stages of the recovery to be characterised by demand for land that can be relatively easily developed and which is within a reasonable commuting distance of downtowns," Diggle said.
Lot shortages were also looming in and near Seattle; Raleigh, North Carolina; and Washington, where job growth has outpaced the addition of home sites, Gollis said.
In Phoenix, where 48,500 jobs were added in the 12 months to July, prices for finished plots in desirable areas had tripled since 2010, Nate Nathan, a Scottsdale, Arizona-based land broker, said. He completed two deals in the Phoenix area this month, totalling US$54.5 million for 1,061 lots.
"This market is on fire," he said,
Permit applications for new US homes climbed last month to an annual rate of 812,000, the most in almost four years, according to the Commerce Department.
While that was up 30 per cent from July last year, housing construction must reach an annual pace of about 1.2 million to accommodate population growth, Mark Kiesel, managing director for Pacific Investment Management, said.
"New inventories are at 50-year lows," he said. "Housing starts are really half of what the long-term average is."
Robert Shiller, a Yale University professor of economics, said this month that real estate was still prone to busts.
"California is the worst," he said. "There are the repetitions of the bubble psychology. It could be building up in some places."
In the San Francisco Bay area, the median home price jumped 13 per cent in July from a year earlier to the highest level in almost four years, according to DataQuick.
The increase was 8.1 per cent in southern California, the San Diego-based information company said.
While the coast recovers, California's inland real estate markets remain among the weakest in the country.
The five US metro areas with the highest rates of foreclosure filings in the first half of the year were Stockton, Modesto, Riverside-San Bernardino, Vallejo, and Merced, all inland California cities, according to RealtyTrac.