Giant Housing Inventory in Southern California

Southern Cal Real Estate Crash Blog reports:

In California, builders alone have 40,000 vacant houses and condos for sale. “We’ve never seen an inventory overhang that big in California,” says Mike Castleman, CEO of Metrostudy, a firm that monitors builders’ projects nationwide. “The builders are paying full freight on those houses in interest costs to the bank and taxes. THey’ve got to move that inventory for whatever price they can get.” In San Bernardino County, about 60 miles east of Los Angeles in the Inland Empire, Kent Phillips, president of Storm Western Development, is selling houses for $330,000 that last year went for $400,000. “It’s dreadful,” Says Phillips. “Last year we were selling four houses a month. Now it’s one a month. The end came just like turning off a water spigot.” Despite the steep discounts, Phillips is still holding six houses that haven’t sold in a 16 home development he completed in January.

But Phillips sees an opening to revive the stricken business: plunging construction costs. He says that prices of finished lots, equipped with roads and utilities have fallen from around $135,000 to $75,000. The cost of construction has gone down around 35%, from $85 to $54 per square foot. “Developers can now sell their houses for at least 20% less than a year ago and still make decent margins,” says Phillips.

Look out down below.