The SoCal squeeze
UPDATED April 25, 1:57 p.m.: It’s no secret that lack of inventory is a problem these days in Southern California. And while it continues to rankle residential brokers across the region, those working in the commercial sector are now enduring an inventory shortage of their own.
“Appetite and capital are still very present,” said Griffin Cogorno of Unire Real Estate Group in Brea, California. He said that industrial vacancies in particular were at a very low level throughout Ventura, San Diego and Orange counties.
“Values continue to rise quarter over quarter as the rents keep trending up,” he said. “Commercial continues to remain very strong as capital is hungry for deals in Southern California.”
Here’s a look at what’s happening in various counties outside Los Angeles.
San Diego County
Eric Hellon, a broker with real estate agency Purplebricks, had seen it before. Within six days of listing a $529,000 home in Escondido, he had six offers in hand. In the end, the house was bought for $555,000.
“There are a lot of buyers out there looking who can’t find anything, so we’re seeing properties going into bidding situations,” Hellon said.
In March 2018, there was a 9 percent decline in residential inventory county-wide compared to the same period last year, according to figures from the San Diego Association of Realtors. That led to a 16.6 percent drop in the number of closed sales, while median sale prices tracked 8.4 percent higher year-over-year.
Within the county, some markets are hotter than others, Hellon said. Homes in the suburban community of Rancho Penasquitos in the northeastern part of San Diego city are on the market for an average of just 16 days before being snapped up, according to an Infosparks Market report derived from data on the local MLS. This contrasts with areas on the outskirts of the city such as Bonsai and Jamul, where the average number of days on the market in March were 83 and 93 days, respectively.
Elsewhere in San Diego County, commercial and master-planned developments are forging ahead.
Plans were recently approved for an $80 million makeover of the Town and Country Resort & Convention Center in Mission Valley, originally built in 1953. Improvements to the 900-plus-oom spread, according to the hotel, will include a new 10,000-square-foot function hall, a 5,000-square-foot spa, a water attraction and new restaurants.
And ground broke in March on Otay Crossings Commerce Park, a 311-acre industrial park right on the U.S.-Mexico border. Tenants will include CalTrans and potentially the city police and sheriff’s department, according to the San Diego Union Tribune.
Those looking for a home in Ventura County might need to wait a while — there’s not a lot out there. New listings continue to dwindle, according to data from the Ventura County Coastal Association of Realtors. In January 2018, for example, there was 2.3 months of inventory on the market based on the current sales pace — down a whopping 24 percent from the same month a year earlier.
Parker Shaw, a broker with Keller Williams in Ventura, said the shortage in the market was further strained by the displacement of hundreds of families who lost their homes to the Ventura fires of December 2017. “Families who owned homes have been forced to rent, making a tight rental market even tighter, and further driving rents up,” he said.
Median sales prices continue to climb, too. In February 2018, the median sale price of a Ventura home was $609,000, up from $582,500 over the same period a year ago.
Still, said Shaw, despite the demand, values haven’t been overinflated.
“You’d think the lack of inventory would drive values up even further,” he said. “But we’ve reached a ceiling with regards to what the local economy can afford.”
In terms of new commercial projects, construction is still underway on the Portside Ventura Harbor revamp in the city of Ventura, which is expected to make available some 20,000 square feet of office and retail space, with a 104-boat marina. The first 56 rental apartments are slated for completion this summer.
In February 2018, there were 1,363 single-family homes sold in Orange County — significantly higher than the 449 recorded in Ventura County, according to the most recent stats from data analytics firm CoreLogic. The median price of an O.C. home in February this year was $710,000, up 10 percent from $645,000 at the same time last year.
Catering to the demand for quality rentals, the units at The Residences at Pacific City in Huntington Beach are move-in ready. The 516-residence development features a large pool with cabanas, plus what’s being billed as the world’s largest TV screen, designed by Porsche, which rises up from underground in an outdoor theater. Rentals start at $3,100 for a 657-square-foot, one-bedroom apartment. The development is also being pitched to homeowners from other parts of the state and country, offering one-month leases for summer breaks.
Mirroring what’s happening in other parts of the state, the Inland Empire saw an increase of 9.4 percent in the median sales price in February 2018 compared with the previous year. More dramatically, homes stayed on the market for just 21 days in February, compared to 41 days in the same period last year, according to figures from Inland Valley’s Association of Realtors (IVAOR).
Much of the demand, said Mark Dowling, IVAOR’s chief executive officer, has been fueled by a slowdown in building. “It’s a fraction of where it was 12 years ago,” he said.
“We’re building maybe 25 to 35 percent of the homes we built in the 2000s,” Dowling added, attributing that to apprehension on the part of builders, who began to slow down on their projects after the 2008 recession hit and continue to be cautious in their outlook.
As a result, Dowling expects to see a 5 to 6 percent increase in sale prices in the residential market across the Inland Empire.
“Growth will be slow and steady and consistent alongside the strengthening of the market,” he said.
Upcoming developments include the master-planned Monterey at Spring Mountain Ranch in Riverside, priced in the low- to mid-$400,000s, from KB Home. And in San Bernardino, almost all of the 70 houses in builder D.R. Horton’s Crimson at Sky Ridge community are sold, Dowling said. The homes start at around $484,000 for about 2,500 square feet.
This article has been amended to reflect that Portside Ventura Harbor’s marina will accommodate 104 boats, rather than 150, as previously reported.