ORANGE COUNTY’S HOME-BUYING HEADACHE : UNDERSIZED & OVERPRICED

Lynne Tillman remembers it happening sometime after the tour of the $350,000 homes in Tustin. Maybe it was the pressure of the move or seeing so many different houses all in one day, or just dealing with the prices that seemed . . . so high .

“Whatever the reason, this poor woman I was showing houses to, this very dear person who seemed so nice and so eager to move here . . . well, she just broke down in tears,” Tillman recalled. “She just s at there sobbing. I felt so helpless.”

A real estate agent for almost nine years in one of the hottest--not to mention one of the most expensive--housing markets in the United States, Tillman and her counterparts in Orange County are getting used to this sort of thing. Not that it happens a lot, but it is happening.

“It used to be enough to just be a good agent and to know the market,” she says, “but now, it’s getting so that you have to be a little bit of family counselor and psychologist, too.”

So it is in the Orange County real estate market--one so hot and volatile that it is reducing people to tears. Spurred by heavy demand and the lack of “affordable” housing, this is a market where the median sale price of a single-family home has skyrocketed to almost $169,000.

And although the median price may vary widely from one part of Orange County to another, prices nevertheless have reached the point where seven out of 10 county residents can no longer afford to buy in their own area, according to a recent survey.

As if anyone here needed reminding, the latest statistics from the National Assn. of Realtors show Orange County ranking as the third-most-expensive housing market in the country, following only New York and Boston, in that order.

If all this is nothing new to most Orange County residents, it is often enough to send newcomers packing for the return trip to Des Moines, where $169,000 will buy a comfortable farmhouse on five wooded acres, as opposed to a 1,200-square-foot town house in Newport Beach.

The indicators of this feverish seller’s market have become almost legendary across the United States. At new developments, grown men and women camp under the stars outside real estate offices for days just for the privilege of bidding the asking price on houses that are not even built yet.

Lotteries are held to determine who can buy homes in new, planned communities. And in the fast-moving resale market, things aren’t much better for the beleaguered buyer. Sellers often find themselves with three and four competing bids, and it is not uncommon for houses to go for more than the asking price.

So explosive is the market that real estate agents often caution that if a house has not sold within a week, there may be something wrong with it. Some houses in the $250,000 range, in fact, sell in hours, not days. And many buyers consider that a bargain.

All this is good news, of course, for those Orange County residents who already own homes, are selling them or have been in the market for some time. A house that cost less than $100,000 a decade ago can now fetch three times that much, leaving the seller with a nice nest egg of equity.

But for first-time buyers here--such as the housewife who sobbed like a child, who turned out to be from New Jersey--or the thousands of executives who are transferred into the county every year, house-hunting can become one long nightmare that starts with the initial price shock-- $200,000 for this? --and ends when the first mortgage payment is due.

And there is more that just price shock. Outsiders are often turned off by the idea of planned tract communities where every fourth house looks the same and where lots are so small that a front lawn can be covered with your average hallway throw rug. After all, who ever heard of a zero lot line in Kansas?

“A lot of people come down here already owning an acre or two, and they see homes on tiny little lots for twice or 2 1/2 times the money,” says Pat McCurdy, a real estate agent with Century 21’s Irvine office. “If you went to Denver or Seattle, for $150,000 you can get a nice house in a nice section with a large lot, while in Irvine you can’t touch a detached home for much less than $150,000. You pay all this money and some people think all the houses look alike.”

Consider, for example, the case of Terry and Betsy Van Noy. They are leaving the comfortable confines of Omaha and their 4,000-square-foot, five-bedroom, five-bath home (complete with finished basement recreation room with fireplace, pool and table tennis tables) on a half-acre, for an equally comfortable but very much smaller house in Anaheim Hills.

“We weren’t too shocked by the prices, because we had heard things were a little crazy out here,” says Van Noy, who will become western division director for group sales for Mutual of Omaha. “But we weren’t fully prepared for how small the places would be. In some of the neighborhoods, the houses are so close together that you can almost walk from roof to roof.”

And yards? “Put it this way,” he says, “I don’t think I’ll need to bring my power mower where we’re going.”

And that’s not all the Van Noys are getting rid of before the move West later this month. To squeeze into their 2,800-square-foot, four-bedroom home here, they also plan to dispose of the table tennis and pool tables, a piano, a spare freezer and “all kinds of small pieces of furniture that we could never get into the house.”

“We’ve got to start getting down to fighting weight,” Van Noy says.

Financially, the Van Noys also will take a beating, at least in the short run. Shortly after selling their Omaha home for $142,000, they signed the contract on the Anaheim Hills home for $328,000.

“When I think about all these things,” Van Noy says philosophically from Omaha, “I always remember my first winter here, when I walked outside and it was 40 below. My nose actually stuck together. Really. My nose stuck together. So you have to remember, we’re also getting rid of our snowblower.”

And then there are Jack and Missy Lucier, formerly of New England and newly of El Toro. Not too long ago, the Luciers were puttering around their 1920s-vintage home in Worcester, Mass., a remodeled colonial sitting on a tree-lined half-acre and loaded with Victorian charm.

“It was a 60-year-old house with a lot of nice extras, like maple trim over the fireplace and doorways,” says Lucier, who was transferred to Orange County in October by Digital Equipment Co. “It had character . . . so different than anything you would find here.”

Lucier, however, may have been luckier than many other newcomers. Coming from an even more expensive housing market in the Boston metropolitan area, he wasn’t surprised by the prices but rather what you get for them.

“What shocked us was what you got for your $200,000, and believe me, we saw some real dumps for $190,000,” he says. “In New England, that kind of money will get you a house with real character and maybe a little land. Here, it buys something that looks just like the house down the street.”

Lucier, a former carpenter, was also appalled by the construction.

“When I came out here and saw what they were doing, just slapping these things together, I couldn’t believe it. These things wouldn’t last through a Boston winter.”

Southern California, of course, will probably never have a Boston winter, but Lucier’s education in the Orange County market did not end there.

“What still amazes me,” he adds, “is that some houses that aren’t even built yet are selling for the full asking price. How can you pay full price for a place you haven’t even seen yet? Nobody negotiates here.”

The situation is particularly difficult for newcomers who are parachuting into Orange County from markets where $150,000 can mean five bedrooms, an acre and a pool. The prices they find are enough to send some packing.

“Most people just can’t afford it,” says Terry Fish, part-owner of a printing-ink company who moved to Mission Viejo in 1984 after 13 years in Indianapolis. “I had to pay about twice the price for the same-size house. Our company has basically stopped asking people to consider moving here because of the prices. I don’t see how younger people can afford to buy anything. They see what it will cost and say they just can’t do it.”

Donald Bird, whose Tustin-based real estate firm, Bird & Associates, deals with executives being relocated here, says it is not uncommon for many young businessmen to politely turn down transfers after a good look at the housing market.

“Unfortunately, it does happen,” he says. “Either they don’t come or they go back to their companies and bargain for more money or some more help in making the move. It’s not like it used to be--when you’d move whenever your company told you to. People now have to be persuaded to make the move.”

“We’ve had women cry and beg their husbands not to take the job,” adds Donna Sutton, a relocation officer at Bird & Associates. “Some people refuse to take the job even though it means a raise and a promotion. I can’t tell you how much money we spend wining and dining these people and taking them around, only to have them write us beautiful letters saying, ‘Thank you, but even though this may hurt my husband’s career, we just can’t come.’ ”

But despite all this, the people keep coming. Statistics show that Orange County and the Los Angeles area will lead the nation in creating jobs over the next decade, and that means more development, more homes and greater demand.

To ease the initial price shock, many companies help people being transferred to high-priced areas, offering salary differentials and other incentives such as picking up the closing costs or paying the first year’s mortgage payments.

UC Irvine is one institution that recognized the housing dilemma early and adopted a subsidies to attract nationally recruited professors.

The university built and maintains an on-campus faculty housing community, giving incoming professors the option of buying at below-market rates.

Dr. William Thompson, an assistant professor of social ecology, says this program was one of the main reasons for staying at UC Irvine when he was being recruited by Northwestern University two years ago.

“A big part of my decision to stay was my contentment with our living conditions,” Thompson says. “I can’t tell you how that contributes to my sense of happiness and well-being.”

Through the program, Thompson bought a three-bedroom, 1,700-square-foot home with a two-car garage in University Hills for less than $150,000. The same home in a comparable area of Irvine could cost upward of $200,000.

University officials note, however, that people taking advantage of the on-campus housing must agree to sell the house at a price tied to inflation and other factors, meaning no one will make a killing.

Thousands of people coming into the area have no such advantages in the housing market. “It’s not cultural shock so much, but rather economic shock,” says Stanford R. Goodkin, executive director of real estate consulting for Peat Marwick. “It’s the shock of going from white wine to beer. That is the reality.”

Along with New York, Boston, San Francisco and a few other urban areas, Goodkin says, Orange County is steadily pricing itself out of the home market for thousands of executives across the nation.

A common problem, Goodkin says, is the inability of many new residents to come up with even the down payment on a new house in Orange County.

“If you sell a $130,000 home in Atlanta and come out with $30,000 in equity, that’s hardly enough to put a down payment on a near-equivalent home here that may cost $300,000,” he says. “And then you have to look at the taxes, which may be higher, and the family’s ability to make the mortgage payment.”

In addition, the shock can go beyond the economic.

“There will be less space and less privacy, and this can be very traumatic for the family,” he says. “And even if the move is made, it can create real problems in the marriage. It is a very emotional thing.”

“The out-of-town people coming here are really stewed goose,” market analyst Al Gobar of Los Angeles says. “I’ve talked to a lot of executives who make $60,000 or $70,000 a year here and are renting because they can’t afford to buy.”

McCurdy, the Century 21 agent, remembers the young executive from Atlanta who was offered a transfer here and came out to look at homes.

“She was coming from a five-bedroom home with a pool in a nice section of Atlanta that cost $110,000,” McCurdy says. “She looked for a long time in that price range and found nothing.

“One day she found an ad in the paper that advertised an ocean-front lot in Newport Beach, 180-degree view of the ocean, for $130,000. She was really excited until she went to see it. It turned out to be a vacant lot.

“That was it, the final straw. She turned down the promotion and went back to Atlanta. I haven’t seen her since.”

But on the positive side, many real estate agents say that after the initial shock wears off, those who do move here adapt quickly to the California life style.

“Once they experience the life style out here, particularly a winter, it’s pretty hard to go back to shoveling snow,” says Ken Noble, a broker who specializes in relocations.

And the New Jersey woman who wept?

“I saw her recently,” real estate agent Tillman says, “and she went on and on about how much she loves it here. She’s been here a year, and she wouldn’t go back to New Jersey now for anything.”