"The land market has just popped to astronomical levels," says Brian Carricaburu, a principal of Park Place Partners, a Newport Beach partnership that specializes in residential land sales.
Now, the question is how long the market will last and how strong it's going to be.
When he uses the word "astronomical," Carricaburu is thinking of 1993, when he was pushing hard to sell finished residential lots -- lots ready for home builders to start pouring concrete and putting up framing -- in Corona for around $47,000. Recently, he put together a deal there for similar lots at $105,000 apiece.
"The hottest markets in the I-215 corridor have reached 1988-'89 (price) levels and the others are moving to catch up," says Doug Jorritsma, a Park Place consultant.
Home builders are complaining, and sometimes hesitant, about the rising market. But, more and more, they're paying.
"The guys that were crying the blues about what they had to pay a year ago are looking like heroes today," says Jorritsma of lot sales in the Orangecrest area of eastern Riverside.
To Carricaburu and Jorritsma, the market in this upswing doesn't look quite like it did the last time, when it was an uninterrupted wave flowing out of Orange and Los Angeles counties.
True, the Interstate 15 communities are leading the way. Rancho Cucamonga, Chino Hills, Corona, Temecula and Murrieta are featuring lot prices at or near $100,000 a pad. In Rancho Cucamonga and Chino Hills, the prices can touch $125,000. You can imagine what the finished home price will have to be. The tightest market is the Temecula area, where developments such as Redhawk, Temeku Hills and Paseo del Sol have almost all the lots tied up already.
But, east of I-215, the Park Place Partners people see more spotty development than a solid wave. Orange and San Diego counties' economies remain stronger than Los Angeles County's so the price pressure is stronger coming up I-15 and out Highway 91 than it is on Interstate 10.
House buyers, and therefore builders, are being a little more selective this cycle, Carricaburu says. Menifee is more popular than Lake Elsinore. East Highlands and Loma Linda are being chosen over Rialto and Colton. Buyers are more conscious of community reputations and school district performances than they were in the 1980s boom, he says.
The test of the strength of this boom will be the massive Oak Valley project, says Jorritsma.
The Oak Valley plan, on both sides of Interstate 10 between Calimesa and Beaumont, calls for multiple golf courses, and nicer homes. It already tanked once during the recent recession. But those homes, because land prices would be cheaper, could be priced at less than those in the I-15 corridor.
Jorritsma, however, notes that finished lots are available in Banning and Beaumont for $50,000 apiece and, so far, "they're not drawing any interest." Oak Valley is "a larger leap of faith" than communities farther west, says Carricaburu.
Builders, Carricaburu and Jorritsma say, are being cautious because many of the economic gurus are predicting a slowdown in the national economy around the end of 2000.
Thus, the practice now is to buy relatively few lots, trying to gauge where demand will be six to nine months from now. While getting ahead of the price curve by buying more lots now is tempting, it's also risky, and most builders had enough of risk a few years ago.
And builders are still trying to figure out how the ag preserve land in Ontario and northwestern Riverside County will affect markets further east. Since that land is much closer to Los Angeles and Orange counties than other available space, it's much more attractive and likely to be more expensive. But the land also needs substantial investment in sewers and other infrastructure, which will tend to make the land more expensive.
"The cycle may be over by the time you start turning dirt" there, says Carricaburu.
Andy McCue's column appears on Sundays and Thursdays. He can be reached at (909) 320-7868. FAX (909) 782-7613. Write: Box 792, Riverside 92502. e-mail AMcCue@pe.net
Published 8/15/1999