The inventory of new homes for sale in Southern California is falling faster than expected, a real estate research firm reported, suggesting the new home market may be starting to recover from its slump.
The Meyers Group, based in the Los Angeles suburb of Encino, said inventory decreased in every county in Southern California, except for San Bernardino, during the last months of 1990.
Ventura County reported the largest decrease in inventory -- a drop of 28.8 percent to 876 units in the fourth quarter. Unsold new homes in Los Angeles County were down 8 percent from the third quarter to 6,424 units in the fourth quarter, according to the report.
Analysts cautioned that the inventory figures alone don't presage a market recovery because a construction slowdown is also reducing inventory. But they say that the figures indicate buyers are snapping up homes already in inventory because of aggressive incentives offered by builders.
The Meyers Group said that sales also are increasing because the homes already in inventory offer many more features than comparably priced homes now being built.
Analysts say the decrease in construction, combined with an increase in consumer confidence, which has boosted sales, significantly could reduce the inventory of new housing within six months.
"At our present level of sales, our available inventory will be gone in three months," said Ted Cox, president of the Santa Monica home builder Watt Industries Inc.
Watt's sales have doubled since the end of last year and it has 280 unsold homes in inventory, Mr. Cox said, compared with 420 six months ago. The company is developing 26 communities in Southern California.
The "acceleration in the depletion of inventories throughout the Southland," has been caused by a 20 percent to 30 percent increase in sales following the end of the Persian Gulf war and a 38 percent drop in new construction from 1989 to 1990 due to lending constraints and poor sales. Home building is projected to drop an additional 17 percent in 1991, partly due to the water shortage, the Meyers group said.
Jeffrey Meyers, president of the Meyers Group, said that the Los Angeles County inventory amounted to an 11-month supply of unsold new homes, compared with a one-month supply when the market was booming in 1988.
The drop in inventory is expected to temper the current buyers' market, where price discounts and incentives have ranged from 10 percent to 25 percent.
"Standing inventory could be depleted by the fourth quarter of 1991," Mr. Cox said. As inventory shrinks, prices will go up, he said.