Outlook, Here and There : . . . How the Slow-Growth Movement Affects County’s Housing Boom

Ten years ago, when Orange County was in the midst of another frantic housing boom, people were most concerned that developers set aside land for parks and help build enough schools to prevent overcrowding.

Now traffic is the most controversial byproduct of the county’s phenomenal growth. The prospect of traffic jams finally pushing exasperated voters to pass stringent limits on growth still has the local business community and its powerful real estate industry worried, judging from speeches by real estate executives Thursday at the Orange County Chamber of Commerce’s Economic Outlook Conference.

Much of the rest of the country is watching California to see how the slow-growth battles raging over the state will be resolved, said Robert Strudler, chairman of Houston’s U.S. Home Corp., the nation’s second-largest home builder.

Strudler placed most of the blame on local governments, which “are still remiss,” he said, because “too many are practicing strategies of avoidance” rather than confronting growth issues head on.

So, said Dale Colby, president of the California Assn. of Realtors, voters are increasingly taking matters into their own hands through the initiative process. There were 109 measures dealing with growth on local ballots across the state this year, Colby said, twice as many as last year.

While fewer are passing, the growth limits also affect an issue near to real estate brokers’ hearts: the ability of customers to buy a house. With home prices rising rapidly in California, fewer people each year can afford one.

“In the long term, the problem with affordability could lead to an exodus of business and young people” from the state in search of cheaper shelter, Colby said.

That could later lead to a “society of haves and have-nots,” he said.

The concerns about growth that arose in the boom years of the late 1970s abated during the last recession, when most people were not concerned about growth because there was a lot less of it going on, even in Orange County, said Peter Ochs, chairman of Newport Beach home builder Fieldstone Co., Southern California’s eighth-largest.

But in 1986, after 4 years of prosperity, the issue surfaced again, prodded this time by the inability of the county’s roads and freeways to handle the traffic generated by new homes and businesses. It culminated in a slow-growth measure that began this year with enormous voter support but that was soundly rejected after the real estate indus1953659168it.

One effect the measure had, Ochs said, was to contribute to the stampede of buyers into the housing market. They continued to pour into the market even after the measure failed in June--only to find that other buyers had snapped up just about every available house.

That kind of demand meant prices rose 3% or 4% a month through much of 1988.

Prices have cooled in the past 2 months, Ochs said: “In the last 60 days the market has cooled off, and in all probability prices will go up only 1% a month or so now, plus the speculators are leaving the market as quickly as they came in.”

Ochs said he expects next year to be another strong one for the local housing industry, with demand still running strong but not as frantic as this year, and with interest rates on mortgages only marginally higher than now.

“The hysteria will not be there,” Ochs said. “Our best guess is that a year from now the average house may be no more expensive than it is now, and at the outside could be only about 12% more.”