“Numerology” tries to find reality within various measurements of economic and real estate trends.
Buzz: Southern California builders in November grabbed their largest share of local home sales since March 2008.
Source: My trusty spreadsheet analyzed homebuying data from CoreLogic: new residences vs. existing ones for Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura counties.
Fuzzy math: Sadly, the bump was not much of the extra supply the local market needs. Rather, it looks like a larger-than-usual seasonal swing.
Topline
Builders closed on 1,824 newly constructed Southern California residences in November, up 610 in a month – that’s 50% – but off five or a 0.3% drop in a year.
Meanwhile, 10,592 existing homes changed hands in November, off 1,500 in a month – a 12% dip – and down 542 or 5% in a year.
That translates to builders having 14.7% of all Southern California sales. Compare that with 9.1% in October, 14.1% a year ago, and an average of 12.4% since 1988. This is builders’ biggest slice of local sales in over 15 years.
Details
Now, before we get carried away with any wild conclusions about new home popularity, November may be the oddest month for home sales of the year.
Since 1988, builders averaged 3,046 sales in November – their fourth-best month of the year, with only December, June, and August having more closings.
At the same time, November is a relatively lousy month for existing home deals – the third-slowest selling – averaging 17,440 closings since 1988. Only January and February are slower.
- HOW NIMBY ARE YOU? Ponder common objections to new housing. TAKE OUR QUIZ!
Why is November so good for builders? A good chunk of the outperformance can be tied to a year-end rush to close deals.
Many big builders race to finish their fiscal year on a strong note. For example, Lennar and KB Home have fiscal years that end on November 30.
So the odd mix of November’s strong new home sales compared with weak existing closings gives builders an average 14.9% market share over the past 35 years – the No. 1 month by this yardstick.
Bottom line
The Southern California housing market could use a rush of new homes.
The pace of new-home construction has slowed by 60% when comparing 1988-2007 and the most recent 16 years. Builders took 16% of sales before the Great Recession rocked real estate – 8% since.
But recent realities show builders facing similar challenges to other sellers in the past year – low affordability.
And new homes are the region’s relative “bargain” housing.
November’s median new home price across the six counties was $673,000 vs. $740,000 for the overall market. Builders have upped prices by 15% in three years vs. a 23% jump for the entire market.
Yet that cost advantage – and numerous builders offering incentives such as discounted loan rates or closing costs – didn’t alter buying patterns.
In the six counties, 14,829 new homes sold in the year ended in November, off 28% in a year. In the same period, 149,635 existing residences sold, off 29% in a year. So builders’ share was essentially unchanged at 9% over 12 months.
Location. Location. Location.
Here is a peek at how builders fared in the past year, by county, ranked by number of sales.
Riverside: 5,824 new home sales, off 18% in a year vs. 26,944 existing residences sold, off 31% in a year. Builder share? 17.8% vs. 15.3% a year earlier.
San Bernardino: 2,835 new, off 27% in a year vs. 20,217 existing, off 31% in a year. Share? 12.3% vs. 11.8% a year ago.
- REAL ESTATE NEWSLETTER: Get our free ‘Home Stretch’ by email. SUBSCRIBE HERE!
Orange: 2,218 new, off 13% in a year vs. 21,022 existing, off 25% in a year. Share? 9.5% vs. 8.3% a year ago.
San Diego: 1,915 new, off 35% in a year vs. 25,412 existing, off 31% in a year. Share? 7% vs. 7.5% a year ago.
Los Angeles: 1,884 new, off 44% in a year vs. 49,972 existing, off 28% in a year. Share? 3.6% vs. 4.7% a year ago.
Ventura: 153 new, off 77% in a year vs. 6,068 existing, off 36% in a year. Share? 2.5% vs. 6.6% a year ago.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
