Is OC Housing Supply Exceeding Demand?
Orange County’s housing market is beginning to respond to slowing population growth, which started in 2015.
“The housing market has already showed signs of slowing down, especially when it comes to homebuying. This is happening in Orange County and across the Southern California region as homebuying has experienced a year-long cool down and buyers have begun to gain leverage,” Paulina Torres, research analyst at JLL, tells GlobeSt.com. “Housing completions for both single and multi-family have increased for all Southern California counties except for Orange County, where single-family completions have increased but multi-family completions have decreased. This is partially due to the heavy increases in multi-family construction, concentrated in Irvine Business Complex, beginning in 2013 that are finally cooling down.”
While the population growth in Orange County is slowing, population continues to increase in the market—and at a higher rate than surrounding markets, like Los Angeles and the Inland Empire. “Although Orange County’s population continues to grow, its rate of growth has been slowing for the past 4 years,” Torres says. “In the Southern California region, Riverside and San Bernardino counties show similar population growth patterns; both experienced a sharp spike in 2010 and have since then remained somewhat steady, while Orange County’s growth pattern is more like that of Los Angeles.”
While Orange County is seeing waning population growth, Los Angeles is actually seeing a decrease in population. “It is important to note that the population in Los Angeles has actually been shrinking for the past two years; in 2018, it decreased by 13,241 residents while Orange County still managed to add 6,018 residents,” says Torres. “Los Angeles’s shrinking population and Orange County’s slowing growth comes as more and more folks look outside of these areas to move, foreign immigration slows and these two counties struggle with housing affordability and the lack of adequate residential development.”
In Orange County, the population trend is resulting in a decrease in housing development, particularly for multifamily housing. “Housing development in Orange County has decreased for multifamily,” explains Torres. “There was a lot of pent up demand following the recession, people had held off from purchasing a home until the economy improved and the growth lasted for seven years. A lot of the multifamily occurred in the IBC and because so many units have been developed during those seven years, there are fewer opportunities now to develop in the IBC for residential.”