Real Estate Industry Southern California

Southern California has more than a housing shortage. It has problems of self-government in its cities that are distorting the economy--and the landscape--and making it hard to attract new business. The problems are both economic and political. And although the economic problem could be solved relatively easily, by a different allocation of tax revenues between state government and municipalities, the political problems are less tractable.

As did the multitudes of World War II veterans and baby boomers who transformed Southern California in decades past, a great influx of Asian and Latino immigrants is leading to epochal shifts in the region's housing market. New studies show that one in every five home buyers in Southern California is foreign-born. That ratio is expected to rise dramatically in the coming years as more immigrants establish themselves and enter prime home-buying age.

A dearth of new housing construction threatens to send Southland home prices, already rising at the fastest rate in a decade, to levels that could put the dream of buying a home in Los Angeles and Orange counties out of reach of all but the affluent. The trend, documented by a stream of reports over the last year from the Department of Housing and Urban Development to the California Assn. of Realtors, could have dire implications for the region's residents and its economy.

Tens of thousands of homeowners across Southern California who won reductions in their property tax bills a few years ago when values plummeted are now being hit with the downside of the real estate boom: unusually hefty increases. Residents in the region's hottest real estate markets, such as southern Orange County, are seeing tax hikes exceeding 10%, and officials expect the trend to spread to other areas, such as Los Angeles and Ventura counties, over the next year.

Tens of thousands of homeowners across Southern California who successfully won reductions in their property tax bills a few years ago when values plummeted are now being hit with the downside of the real estate boom: unusually hefty increases. Residents in the region's hottest housing markets, such as south Orange County, are seeing tax hikes exceeding 10%, and officials expect the trend to spread to other areas, such as Los Angeles and Ventura counties, over the next year.

High construction costs, limited land and reduced tax incentives are hampering development of new apartment units in Southern California at a time when housing demand and real estate values are climbing. The slow rate of development is in dramatic contrast to the last real estate boom cycle, when thousands of new apartment units in all price ranges hit the market. Today's building pace barely surpasses that seen during the doldrums of the last recession.

Despite an unprecedented boom that has allowed minority and moderate-income families to buy homes in Southern California in rising numbers, a new Harvard University study found that minority ownership still sharply lags that of whites, and that the amount of affordable housing for the poorest families--regardless of race--continues to shrink.

Southern California's continuing business expansion will mean steady demand for more office, industrial and retail space through the rest of this year and into 1999, according to a real estate brokerage's midyear forecast. The Grubb & Ellis Co. report credits the strong regional economy and "growth in dozens of industries" with creating increased demand for all types of commercial space in Los Angeles, Orange, Riverside and San Bernardino counties.

The housing market stayed in high gear throughout Southern California in January and shifted into overdrive in Orange County, where prices rose at a double-digit pace not seen since the late 1980s, a real estate tracking service said Wednesday. The median home price in Los Angeles County was up 6.1% from January 1997 to $173,000 last month, with sales up nearly 16%. The median is the point at which half the sales were for less, half for more.

Palo Alto-based Essex Property Trust is expected to close today on a $50.5-million apartment purchase--one of the largest in Southern California so far this year. The company is buying a 608-unit apartment complex owned by a Lehman Bros. partnership in Newbury Park. The purchase brings Essex's total Southern California portfolio to 1,700 units.