Home-building boom returning to Southern California
Home-building boom returning to Southern California
Home builders are bidding up land prices, scrambling to find workers and building bigger, more expensive homes than they did just a few years ago.
By Alejandro Lazo, Los Angeles Times
April 13, 2013, 8:08 p.m.
Attracted by a dozen new Huntington Beach homes touted as "starting in the low 1,200,000s," about 15 hopefuls had camped out for days. They were waiting for a chance to get their names on a list to buy into the first phase of a new subdivision.
One would-be buyer had flown in a friend from Las Vegas to hold his place in line. Another shopper had hired a pair of men to wait in 12-hour shifts. Christopher Thibodeau, a 43-year-old operations director for a biotech company, rented out an RV so he could telecommute for a week in the builder's parking lot.
"Do you absolutely have to be here? Maybe, maybe not," Thibodeau said, sitting inside the spiffy camper with his laptop and iPhone laid out on a desk before him. "I am just going to be safe and camp here."
With mortgage interest rates low and prices for existing homes rising, builders are coming back into the market. They're bidding up land prices, scrambling to find workers and building bigger, more expensive homes than they did just a few years ago.
The tents in Huntington Beach brought to mind last decade's housing boom, but the market has changed dramatically since then. Tens of thousands of Southland homeowners who would like to sell their homes still can't because they're underwater. That has created a dearth of inventory that's fueling bidding wars and camp-outs for a limited supply of dwellings.
The median home price for new homes sold in Southern California jumped 19% year-over-year to $401,000 in February, according to real estate firm DataQuick. Builders started construction on 2,097 new, single-family homes in Southern California during the fourth quarter of 2012 — a 56% increase from the same quarter the previous year, according to research firm Metrostudy.
That sharp increase is perhaps not surprising, given that 2011 was the worst year on record for new construction. Still, the rapid turnaround may be one of the most meaningful developments for the broader economy; new home construction is a powerful driver of jobs and economic activity.
The building will create jobs not only in construction but in related industries including lumber, concrete, heating and air conditioning and more. The economic boost should be even stronger when builders complete once-dormant subdivisions and move on to virgin land.
"They are going to begin with the development of new land, and that is typically about a third of the cost or more of the overall house," said Gerd-Ulf Krueger, principal economist at HousingEcon.com. "That is going to have a pretty big impact on the housing economy."
Through the bust, builders scrimped through unprofitable quarters by putting up small, simple models to compete with the many cheap foreclosed homes on the market. Now they're going big again as prices mend, even in markets that experienced severe price declines, such as the Inland Empire.
Rosena Ranch — a 386-acre subdivision in San Bernardino County, where construction slowed dramatically during the recession — is now bustling with builders pounding away at massive home frames.
It's a big turnaround from 2011, when this project was featured as an example of boom-era overbuilding in an exhibit by the New York Museum of Modern Art entitled, "Foreclosed: Rehousing the American Dream."
That show selected the Los Angeles architecture firm Zago Architecture to re-imagine the suburb. The firm produced models that included a shuttle service, an "ecological" zone for endangered plants and animals, and a focus on communal living, with some duplexes replacing large homes.
With the real estate market now recovering, the project's builder, Lennar Homes, has done its own rethinking. The Miami corporation recently unveiled a "Superhome" at Rosena Ranch. It's basically two homes in one — with a section that functions as a separate apartment, with its own kitchen and bathrooms. The builder hopes to attract families looking to house multiple generations under the same roof.
If the McMansion was the icon of excess during the housing boom, the Superhome at least seeks to make more efficient use of a huge space. Lennar has packed as many as seven bedrooms and four bathrooms into about 4,000 square feet.
"With interest rates so low, it is still affordable to buy a larger home," Lennar regional president Greg McGuff said on a tour of the property. "You really have an opportunity for multi-generational living, but you also have the opportunity for more people living in the home to contribute to the mortgage."
Few new homes have been built since the housing crash. Nationwide, just 42,000 completed new homes were available nationwide in February, which is near historical lows, according to the Commerce Department. Inventory in the market for previously owned homes has also dried up as wealthy investors and others have snapped up foreclosures.
In the meantime, buyers have been drawn back to the market by an improving economy, low prices and historically low interest rates. Emile Haddad, chief executive of FivePoint Communities, developer of the massive Great Park Neighborhoods project in Irvine, said both buyers and builders sat out the slump waiting to see what would happen.
Now both are back in force.
"It feels like it is a very strong recovery," Haddad said. "And whereas a year ago, we were talking about some sub-markets doing well, right now the recovery is strong in almost every market."
Developer Mike Wells has tried to kick-start his Desert Crest Homes development in hard-hit Lancaster three times since 2006, though he has no homes to show for it: only curbs, gutters and sewer and water lines.
He believes his location is ideal. An existing subdivision, filled with white and cream-colored one- and two-story homes, lies adjacent to where Wells has planned his new community. And the location is bucolic: Across from his site clusters of Joshua trees dot a brown, desert landscape framed by distant mountains. Wells said he plans to start building model homes next month with his eyes on a June grand opening for the community of 22 solar- and wind-powered homes.
"There is a shortage of homes in the Valley," Wells said. "I wish we had these homes built right now."
Many builders, however, are taking their time bringing new products to market, said Brad Hunter, chief economist for Metrostudy. They are more concerned about charging a premium price than about selling homes in volume.
"We have seen more and more builders in the position of being able to raise prices again, and to me that is the most important trend," Hunter said. "There are builders in populated areas in Southern California that are trying to slow down their sales pace by raising their prices."
Home builders typically sell new subdivisions in phases, setting fixed prices for each phase rather than selling homes to the highest bidder. The strategy is to raise prices in subsequent phases to guarantee price appreciation for early buyers and steady profits for the builder.
But demand is so strong that some builders are tweaking the traditional formula.
When Woodbridge Pacific last month announced it would be selling new homes as part of the first phase of its 80-home Seaglass project in Huntington Beach, it did not create a waiting list of pre-qualified buyers, as builders often do. Instead, it decided to sell the homes first-come, first-served as a way of getting the most motivated and committed buyers, said Todd Cunningham, chief executive of Woodbridge Pacific.
The company also raised prices after the first six homes were sold.
That turned off Thibodeau, the biotech executive, who had waited a week just to get his name on the list. He had planned to snag a five-bedroom model for $1.3 million, but balked when Woodbridge Pacific boosted the price to $1.4 million.
"I just decided it wasn't worth it," he said. "I'm not trying to sound like an angry, disgruntled guy. They have limited inventory, and the market is a very hot market."
alejandro.lazo@latimes.com
http://www.latimes.com/business/real...,2308880.story
