Economist Says Rising Housing Prices, Shortage Will Continue

Housing prices will rise over the next five years by more than 5% a year, a pace that rivals the 1980s, which saw some of the biggest gains ever in Orange County, a leading economist predicts.

As the new economy generates new jobs at a far faster pace than new homes can be constructed, previously owned homes will show steady appreciation, says Chapman University President James Doti, who will deliver his annual forecast for the construction industry Monday night during the Outlook 2000 program at the Irvine Marriott hotel.

This year, home prices should increase about 8% as the county adds at least four new jobs for every new home being planned, the highest gap that Doti can recall. Housing permits are expected to edge up to 11,000 from 10,000 last year, but still will fall several thousand units short of meeting demand, he says.

While current home owners will bask in rising home values, other families will be forced to buy in the Inland Empire, which has Southern California’s largest reservoir of affordable homes, and endure longer commutes “because they can’t find housing,” Doti says.

He expects Orange County’s housing supply to improve gradually over the next five years as builders put up an average of 13,600 homes per year.

That estimate still falls short of the 14,000 units needed annually to match growing demand and to keep home prices from racing ahead of inflation. And the gap could be even larger because home demolitions weren’t factored in with population and job growth.

“It’s becoming increasingly difficult to find land for major development,” he said.

The Outlook 2000 program is scheduled to begin at 6:30 p.m. Monday. For information, call the Orange County Building Industry Assn. at (949) 224-0321.

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Going Up

Over the next five years, home prices in Orange County are expected to move up at a rate that would rival the frenzied market’s gains in the 1980s.

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99 est: 11% 2000: 8% 2001: 4.4% 2002: 5.4% 2003: 5.8% 2004: 4.6%

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NOTE: All figures except 1999 are forecasts

Source: Chapman University