U.S. Housing Market Conditions, Second Quarter 2002: National Data

Housing Market Profiles

Los Angeles-Orange-Riverside-San Bernardino, California
The greater Los Angeles area is composed of five counties with a population of 16,373,000 in 2000. These five counties represented 48 percent of the State’s total 2000 population. The area’s population increased by more than 1.8 million between 1990 and 2000. The largest population growth in the area was in Los Angeles County, which added 656,000 persons. The highest rates of growth were in Riverside and San Bernardino counties at 32 percent and 21 percent, respectively. The California Department of Finance estimated that the greater Los Angeles area increased at a compound annual rate of 2.1 percent between April 2000 and January 2002, slightly higher than the rate for the State of California.

The Los Angeles area economy is outperforming the economy in Northern California because it is less dependent on the technology sector. Los Angeles-Long Beach is the largest port complex in the United States and will benefit from a projected increase in international trade this year. During the 12-month period ending June 2002, the Los Angeles area’s nonagricultural job base increased by 42,200 jobs, or 0.6 percent. Although Los Angeles County lost 15,400 jobs, these were offset by gains in the other four counties, especially Riverside and San Bernardino. The unemployment rate increased from 4.6 percent in the second quarter of 2001 to 5.9 percent in the second quarter of this year.

Greatly expanded military budgets will boost jobs for local defense contractors. For example, Boeing, the largest employer in the Los Angeles area, has contracted to build 222 Super Hornet planes for the Navy, and Northrop Grumman and Raytheon will be working on the aircraft as subcontractors. Projected increased tourism during the second half of 2002 should benefit the hotel and restaurant sectors and the local economy in general.

The slowdown in area job growth has not affected the overall demand for homes in southern California. Single-family permit activity reached 41,465 units in 2001, the highest level since 1990, and was 6 percent higher in the first half of 2002 compared with the same period last year. According to Data-Quick, 140,700 new and existing homes were sold in the first 6 months of June 2002, an 18-percent increase over the same period in 2001. The area’s median sales price for homes sold in the first half of the year, $264,000, reflected a 17-percent increase over a year earlier, according to the California Association of REALTORS^®. The median price of a home as of the second quarter ranged from $172,200 in Riverside-San Bernardino to $411,100 in Orange County.

Multifamily production has fluctuated widely in the Los Angeles area, according to the changing economic fortunes of the region. Multifamily permits fell dramatically from 30,160 units in 1990 at the end of an earlier boom to a decade-low 5,627 units in 1995. Renewed economic conditions boosted multifamily construction starting in 1999. From 1999 through 2001 multifamily building permit activity in the area averaged 16,000 units annually, almost double the average volume from 1994 to 1998. With a lack of large vacant parcels close to employment centers, high land and development costs, and a weakened local and national economy, multifamily permits were down 30 percent in the first half of 2002, to 5,868 units, over the year-earlier period.

The rental market conditions within the greater Los Angeles area vary from tight to balanced. Los Angeles county remains tight, with an overall vacancy rate of 4 percent, owing to a robust market in downtown Los Angeles. Orange County rental conditions were tight through the middle rent ranges but were soft at the upper end of the market. The vacancy rate in the community of Irvine, where much of the upper end rental units are located, is more than 9 percent, forcing apartment owners to hold rents steady and offer concessions. Apartment rents across southern California have risen modestly from 2001 levels. According to a RealFacts survey of larger complexes, Los Angeles area rent increases in the second quarter over the year-earlier quarter were mostly in the low to middle single digits, ranging from 2.4 percent in Orange County to 6.7 percent in San Bernardino County.

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