Inland Empire No Longer Cheap Alternative for Homes

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The Inland Empire has been a relative bargain in recent years for home shoppers from other parts of Southern California.

But that 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. But last month, that price reached $189,900 nearly the same amount as it is in L.A. County.

Meanwhile, the stream of new subdivisions coming on line in the Inland Empire has slowed and a dwindling availability of finished lots is raising questions among developers and analysts about the outlook for the area housing market.

For the immediate future, forecasts for 2000 are for sales to remain within 1999’s range of 13,000 homes. And prices are expected to increase by just 4 percent.

But in a year or two, observers say, workers in Los Angeles and Orange counties looking for an affordable home will either have to pay more for an Inland Empire residence or commute farther 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 Los Angeles have been taken. Everything has been depleted in all price ranges.”

Demand drives prices

Indeed, construction of new homes in the Inland Empire tailed off in the latter half of 1999. And developers blame the slowdown in planning new subdivisions on slower entitlement processes, increasing fees, and fears of higher interest rates.

“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 the land closest to L.A. has been snatched off the market, fewer finished lots are left to be filled.

Centex officials say the firm has enough pre-purchased parcels in its inventory to keep a steady stream of projects going for about the next two years in relatively close proximity to L.A. consumers.

But estimates vary widely concerning how much developable land remains available for purchase in the Inland Empire. Few disagree, however, that the push east has already started.

“It’s a polarized market right now the move-up market is growing, but the affordable product is being pushed out farther,” said Johnson of the Meyers Group.

One new development option is an area known as the Dairyland an agricultural preserve and farming area. About 12,000 acres of previously undeveloped land has now 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 homes, each selling in the mid-$200,000 range. The deal, which hinges on land acquisition still in escrow, would produce new homes ready for occupancy by the end of this year.

“The Dairyland provides excellent opportunities for commuters working in the San Gabriel Valley,” said August Belmont, division manager for Standard Pacific’s Inland Empire operations.

Large-scale projects

Grading is in progress on two other projects that would include almost 3,000 houses in the Dairyland area. A third project will include more than 2,000 houses, with most priced at $200,000 or more.

“Most of the Dairyland 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 in the works, according to Whittlesey Doyle Realty Advisors’ partner Tom Doyle. But those new developments are going up farther and farther from Los Angeles.

“Basically, home buyers are being pushed farther 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.”

But municipal governments may not be as willing to help defray those development costs, warned Otto Kroutil, development director for the city of Ontario.

“That’s going to have a huge impact on the cost of new housing,” he said.

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