Inventory of new homes dips to 30-year low in region.

Jack Milburn can't keep up.

The longtime Lancaster real estate agent has been trying to meet the highest level demand for new houses in the last 25 years, including many buyers willing to sign before a shovel is in the dirt.

"Folks are buying them before they get out of the ground," said Milburn, a broker at HomeBased Realty. "I don't know a single tract with finished homes on the market."

The land rush in the north Los Angeles city of 119,000 is emblematic of the wider Southern California market, where there are record low inventories of new homes.

As of the end of June, fewer than 3,200 new homes were unsold in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties combined, according to the Real Estate Research Council of Southern California's second quarter report. That is 31 percent lower than the year-earlier period, and the lowest number since the survey began in 1971.

In Los Angeles County, just 396 new homes remained unsold at the end of June, also a three-decade low.

The low inventory levels have been a factor in feeding a steep run-up in L.A. County home prices. The median-priced L.A. home sold for $342,000 in July, up 22 percent from the year earlier and more than 42 percent above the price of July 2001, according to DataQuick Information Systems.

"Whatever is being released is being absorbed," said Russ Valone, president of San Diego-based MarketPointe Realty Advisors, which supplied the data for the Research Council report. "You've had a gradual increase in supply, but because of an increase in sales, there's been a downward spiral of inventory."

Indeed, the 19,000 housing permits issued in L.A. County last year marked the ninth consecutive annual increase, and represented a 6 percent jump from the prior year, according to the Construction Industry Research Board.

The trend is likely to continue this year, with more than 10,700 permits issued in the county during the first six months.

Still, an increase in supply has yet to make up for years of constraints on development, particularly for an attached housing sector that provides the only alternative to entry-level buyers, according to Valone.

That market too, is showing signs of a rebound. More than 11,000 multi-family units were permitted in L.A. County last year, dwarfing the 3,000- to 5,000-annual permit range between 1993 and 1998 but still far less than the 32,500 and 24,500 permits issued in 1988 and 1989, respectively.

"In Los Angeles County, for anything over 50,000 square feet, you need discretionary approval," said Lawrence Scott, vice president at Alexandria, Va.-based apartment builder AvalonBay Communities Inc., at a real estate conference sponsored by the Anderson School at UCLA last week. By continuing to pursue the development of local multi-family projects "we have a high threshold for pain," he said.

Meanwhile, interest rates are nearly 2 percentage points lower than they were three years ago. encouraging apartment renters into the new home markets of the Santa Clarita and Antelope valleys despite a sluggish economy, according to both Milburn and Jeff Mezger, chief operating officer at L.A.-based KB Home.

Many of the buyers are minority and immigrant families now able to qualify for mortgages with the low rates, said Mezger, whose company sold 522 new homes in L.A. County last year, more than any other individual developer.

"We focus on first-time and move-up projects," said Mezger. "In addition to the normal formation of job growth, we've had an additional phenomenon of an immigrant wave."

Milburn expected inventory levels to creep up as interest rates climb, particularly in markets like the Antelope Valley, where many buyers are from single-income households.

Yet new home supply will continue to trail demand, even with an interest rate jump, according Mezger.

"If interest rates go up, it probably means the economy is stronger and jobs will be created," said Mezger. "That'll create additional demand."

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