Sunday, March 02, 2014

LA Times: New Home construction still near record lows

by Bill McBride on 3/02/2014 10:36:00 AM

From E. Scott Reckard at the LA Times: Supply of new homes for sale remains extremely low

About 15,000 new homes will be sold this year in the six-county region — 58% less than the 20-year average, predicts Pete Reeb, an economist with John Burns Real Estate Consulting in Irvine.

... Only about 10% of today's new projects are attached condominiums, compared with half in previous expansions, said housing consultant Jeff Meyers, who heads Meyers Research in Beverly Hills. ...

The delayed recovery in home construction owes to a variety of factors. Many smaller builders were wiped out by the housing crash, and those that remain can't get financial backing from institutional investors. The larger, publicly traded builders, meanwhile, are reviving stalled projects. But they remain leery of launching new developments in more affordable areas with open land, such as the Inland Empire, where income and employment remain depressed.

Developers are also struggling with a shortage of ready-to-build lots — those with government approvals, streets and utilities in place. That's because planning for new developments screeched to a halt when the housing market imploded. It will be at least next year before the slowly reviving process makes many new projects feasible, said Randall Lewis, executive vice president of Lewis Group ...
Builders in LA have choices: build in more remote areas with open land - but those areas are still struggling, build smaller in-fill projects, or go vertical (high rise condominium projects). Over time, I expect the LA area to go vertical.

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