Southern California Builders Still Struggling Amid Housing Industry Recovery

January 10, 2020
Builders Upset
Unhappy engineer sitting on building stairs at construction site, They feel tired and stressed from work. By ronnarong - Adobe Stock

Was 2019 your best year since the Great Recession? Don’t tell that to a home builder in Southern California. While much of the rest of the nation experienced growth and stabilization, especially in the second of half of the year, Southern California builders had the largest inventory of unsold homes since the housing market crashed. Their plight was worsened by their bet on luxury markets: As demand for affordable homes increased, builders were forced to part with high-priced residences that sat on the market  for a discount. 

It was a tough year for Southern California homebuilders.

As 2019 started, builders found themselves stuck with the largest inventory of unsold residences since the Great Recession. Rising interest rates and economic anxieties cooled house hunting, making the builders’ big bets on higher-priced homes a poor choice. So for much of the year, builders were forced to discount slow-selling homes while retooling plans to create lower-priced product.

Two new rankings of the nation’s fastest-selling “master-planned communities” — neighborhoods carved from large parcels of undeveloped land — provide a glimpse into how tough it was for local developers. Especially, in a year that was fairly successful for builders elsewhere in the nation.

These scorecards, from John Burns Real Estate and RCLCO, having slight differing results but show a common theme.

Four Southern California projects were on both national lists of top sellers. Reviewing the past two year’s rankings, Burns shows sales at the four local communities were down 12% in 2019 vs. a 10% gain among the top 50 sellers nationwide. RCLCO shows local sales were down 19% vs. a 9% gain elsewhere. Here’s how that broke down by community …

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