SoCal Facing Homebuilding Lot Shortage

By JONATHAN LANSNER  | OC Register Sept. 13

Let’s look at Zonda’s curious index of lot supply. This yardstick uses historic real estate and demographic factors to track.

 How many lots are available for building new homes? It compares that inventory with the research firm’s ideal supply.

In a nutshell, Zonda’s index says there hasn’t been enough progress in creating homebuilding spaces in SoCal.

Take the Inland Empire, for example. Zonda says the supply of ready-to-build lots improved by 49% in the year ended in the second quarter. But that jump leaves this inventory benchmark at 54% of what Zonda sees as a balanced lot count for Riverside and San Bernardino counties.

In Los Angeles and Orange counties, builders have 47% more lots, but that supply is only 35% of Zonda’s ideal estimate of local needs. And San Diego’s supply is up 61% but is 29% of what Zonda deems normal.

Builders rush to bring new units onto the market as existing home sales slide to historic lows. These lot shortfalls have nudged builders to get creative regarding land acquisition.

Of course, builders can buy finished lots from master-planned community developers. That’s the expensive route and typically produces high-end housing – not the market’s most significant need.

Or builders can buy undeveloped raw land or old, under-utilized properties and do the slow, heavy lifting of getting the project approved and doing the pre-construction grading and preparations.

In Mission Viejo, the builder bought a hillside off El Toro Road in December 2020. The significant and costly planning and grading at the site meant that sales of the 91 townhomes at Saddleback Place didn’t start until February 2023. The wait seems worth it. In six months, Trumark has swiftly signed sales contracts for 44 units.

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“You’ve got to be able to do the heavy land development or infill development,” says Trumark’s SoCal president, Richard Douglass. “You’ve got to be able to be efficient and work in the masterplan communities and have the capital to do that because it’s costly money and costly land.