Endangered Bay Area species: the new home

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Daniel Huang and his wife, Cathy, were looking to downsize from their three-bedroom house in the East Bay. Their children had moved out, and the couple wanted something new.

They hunted for months and finally bought a two-bedroom condo under construction in a Fremont development called the Locale at State Street. For slightly less than $800,000, their 1,200-square-foot unit came with the modern appliances and features they sought. “The hardest thing for us,” Huang said, “was waiting.”

The couple is part of an endangered species — owners of a new Bay Area home.

 Endangered Bay Area species: the new homeIn a region of more than 7 million people, just 266 new homes, townhomes and condos were sold in January. It was the lowest number of monthly new home sales in at least two decades, according to an analysis for this news organization by real estate data firm CoreLogic. The slump has continued into the summer — new home sales in July were off 9 percent from the previous year. The region is on pace for its lowest number of new home sales since 2011.

Put simply, developers — burdened by high land costs, local regulations and scarce labor — are building far fewer new homes.

In previous economic booms, residential construction has flourished in the nine-county region. Not this time.

“It’s certainly not lack of demand,” said Paul Campos of the Bay Area Building Industry Association. Homebuyers are looking for both new suburban developments and higher-density redevelopment. “There’s tremendous demand for both types of housing.”

New home sales have fallen to record lows, according to an analysis of CoreLogic sales data since 2000. The number of new home sales in the nine-county Bay Area peaked at about 1,800 in December 2004, while the monthly average was around 840 sales. In July, Bay Area developers sold 490 new homes and condos.

An average month for existing home sales is about 5,800 transactions, with a high of around 11,160 sales coming in June 2004, according to proprietary CoreLogic data. Overall sales fell 2.2 percent year-over-year in July, to 7,404 homes.

Since the start of a record run-up in median home prices, new home prices have escalated faster than existing homes. Between April 2012 and April 2019, median new home prices rose 135 percent, while existing home prices rose 112 percent. The median sale price for a new Bay Area home in April was $969,000; the median price for a resale home was $900,000, according to CoreLogic.

In the last decade, San Jose has added roughly three times as many jobs as houses, condos and apartments, according to a recent analysis by Apartment List. San Francisco and the East Bay added about 3.5 jobs for every housing unit during the same period.

The Bay Area’s imbalance between new jobs and new housing is the most pronounced in the country. Apartment List housing economist Chris Salviati said a healthy ratio of jobs-to-housing permits is about 2-to-1. He called the Bay Area numbers “pretty severely out-of-whack.”

And the housing deficit could grow worse. Permits for residential construction in California fell 16 percent in 2018-19 from the previous 12-month cycle, according to an analysis by the Public Policy Institute of California. Permits dropped nearly 50 percent in San Mateo County, 30 percent in Alameda County, almost 10 percent in Santa Clara County and 7 percent in Contra Costa County.

Zillow senior economist Issi Romem said the housing backlog began decades ago and has worsened in the Bay Area as cities have imposed “an even heavier blanket of local land use policy.”

Elected leaders in several Bay Area cities have fought large residential developments and favored commercial projects, which typically bring more tax revenue and less demand for services such as schools, police and infrastructure. Long-time residents often are wary of increased traffic and changing community demographics.

With a shrinking supply of land to develop, contractors turn to redeveloping existing structures as so-called in-fill housing. This redevelopment is typically more expensive, encumbered by environmental and zoning restrictions and slower to come to market.

Tony Yaconelli, owner of Pacific Builders in Willow Glen, does two or three custom homes a year. Yaconelli, in business since 1982, said demand is strong.

He focuses on properties in Monte Sereno, Los Gatos and Saratoga. Municipal planners and inspectors know his work, and Pacific Builders can move efficiently through the regulatory process, he said.

He’s had “exceptional clients” from other Silicon Valley cities request projects. But he’s turned down the work, knowing local regulations can stretch budgets and add up to a year on a project’s timeline. “If they’re saying ‘no’ at every level,” he said, “it’s a nightmare.”

Katia Kamangar, executive vice president at SummerHill Homes, said although the overall real estate market has cooled from last year’s record highs, buyers are still attracted to ready-to-move-in homes. A new build means a family doesn’t have to go through a costly and long remodel.

SummerHill Homes built the Locale at State Street in Fremont, a mix of condos and townhomes near transit on a redeveloped property. It’s the company’s sweet spot — building in-fill homes in existing neighborhoods near rail stations.

It takes about three years from the purchase of a property to having single-family homes built and move-in ready, she said. The local approval and construction process for condos can take up to five years.

One property in Los Gatos, fraught with neighborhood and city opposition, has taken more than four decades to develop.

“The cycle time is pretty long,” Kamangar said. “A lot can happen in that time. And it does.”

The Huangs moved into the Locale in early July. They have no regrets, Daniel Huang said, and the few minor fixes were handled quickly by the developer. “It meets all our expectations.”

Other units still under construction in the development, a SummerHill agent said, have been selling briskly.

Article source: https://www.mercurynews.com/2019/09/01/endangered-bay-area-species-the-new-home/

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