NEWPORT BEACH, CA—With home prices reaching new heights in coastal Orange and L.A. counties, the Inland Empire is offering an attractive alternative for home buyers seeking more affordability, Land Advisors VP Winn Galloway tells GlobeSt.com. Galloway recently represented Trumark Communities in the acquisition of Rancho Miramonte, a 143-acre site for 823 single-family detached homes in Chino, CA, which was purchased through a foreclosure sale for an undisclosed amount.

The seller had defaulted on the first, second and third lien notes on the property, totaling approximately $30 million. Since the owner was unsuccessful in selling the land, Trumark, who was the holder of the second and third liens, held a foreclosure sale on the property to pay back the notes.

Chino is located in the forefront of the Inland Empire in San Bernardino County and is accessible to various employment nodes, retail corridors and recreational areas, and Land Advisors says the Rancho Miramonte project is an excellent opportunity to meet the significant demand for new single-family housing in the area. With approximately 1.4 million households in the region currently, forecasts show that home formation is expected to increase 0.9% in 2017. With the slow rate of new homes being built in the area, it would take about seven years to raise homeownership by 1% or 2%.

Land Advisors also reports that John Burns Real Estate Consulting LLC upgraded the Riverside-San Bernardino MSA to a “hot” housing market based on strong sales and rising home-price appreciation. “Young families and retirees with homeownership goals are opting for the Inland Empire over other parts of Southern California since it offers better housing affordability in relation to their incomes,” says Galloway.

David Kidder, president of Land Advisors, adds that San Bernardino County continues to experience growth. “The region's relatively high affordability and its suppressed housing supply, held down in part by the construction-labor shortage, put pressure on rising demand, further depleting already dwindling levels of inventory. Opportunities such as Rancho Miramonte are rare.”

We spoke with Galloway about what is drawing home buyers to the Inland Empire, the challenges home builders face there and how the housing market compares to the jobs market there.

GlobeSt.com: Why are home buyers drawn to the San Bernardino County market?

Galloway: With home prices reaching new heights in coastal Orange and L.A. counties, the Inland Empire is offering an attractive alternative for home buyers seeking more affordability. Consider the fact the average detached new home in Irvine is now selling for over $1.3 million, while a detached new home in Chino is approximately $500,000. The value becomes even more enticing when you consider pricing for new homes has yet to reach the previous peak, giving home buyers confidence in the decision to invest in an Inland Empire home. In addition to affordability, the Inland Empire continues to offer more space and square footage to home buyers. Whether it's the size of the home or the size of the lot, coastal counties can't offer the same unless you build “up.”

GlobeSt.com: What is drawing home builders to the Inland Empire market?

Galloway: New homes are currently selling at the best pace since the 2005-2006 market peak. In 2013, the Inland Empire market began to show life as the plus-or-minus-80 active communities averaged approximately one sale per week. At present, home builders are experiencing approximately the same pace, but have nearly doubled the community count at plus or minus 150. Due to the absorption of new home product, many home builders are beginning to exceed business plan and are now targeting more-aggressive growth goals for the coming years.

GlobeSt.com: What challenges do home builders face in the Inland Empire?

Galloway: With the increased absorption of new homes comes the absorption of deliverable lots to the home building community and the inevitable shortage of entitled lots. Land Advisors is beginning to see a shortage of well located, entitled, new-home communities as builders scramble to meet the aforementioned growth goals. As a result, many home builders have been forced to expand their acquisition criteria to include larger projects or those which still need entitlement perfection. Over the last 24 months, 80% to 90% of home builders' deals were closing at grading permit and were under 100 lots. However, there has been a recent shift to acquire larger communities with some level of remaining entitlement, much like Trumark's recent acquisition of Rancho Miramonte in Chino. In order to meet growth goals, builders must continue to be nimbler in their acquisition efforts, and developers need to continue the creation of new communities.

GlobeSt.com: How does the housing market compare to the jobs market in this area?

Galloway: Employment remains a strong indicator of the health in the Inland Empire. As of May 2017, the Inland Empire's unemployment rate has fallen to 4.5%, down from 5.4% just one year prior. Surprisingly, we're actually not building enough homes to keep up with job creation. For example, the Riverside metro area has only one residential permit for every 5.7 jobs (second worst to San Francisco at 6.4 jobs per permit), and with millions of square feet of industrial development either in construction or in planning, more jobs keep coming to the region.

GlobeSt.com: What else should our readers know about San Bernardino County housing?

Galloway: The maturing Millennial generation and their inevitable household formation, improving traffic with the widening of the 91 freeway and affordability all point toward a robust housing market in the years to come, providing master-planned projects like Rancho Miramonte a bright future.

Instant Insights /

OC Dynamics Push Home Buyers to San Bernardino County

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