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SPACE INVADERS

SPACE INVADERS

Homebuilders Report Flat New-Home Sales as OC Land Dwindles

By MATHEW PADILLA

They did it again last year.

Orange County’s top 30 homebuilders defied predictions of a market slowdown.

Instead, they sold 6,378 houses and condominiums, almost on par with sales of 6,404 in 2002, according to this week’s Business Journal list.

Builders are ranked by new-home sales data provided by Costa Mesa-based The Meyers Group.

Fueled by historically low interest rates last year, demand for new homes continued to outstrip supply,a trend which continues to push home prices higher.

Homebuilders were able to sell everything they had, and the real challenge in OC remains finding land to build on.

The Business Journal’s list this week reveals a rebirth in condominium construction. Sources said because land is both scarce and expensive, condos are growing in popularity among builders. Basically, condos enable builders to get more units on the land they own.

OC’s top 30 builders sold 1,937 condos last year, representing a 63% jump from 2002’s 1,186 sold, according to Meyers. At the same time, sales of traditional houses declined 15% to 4,441 in 2003, down from 5,218 a year earlier.

Condos generally are more affordable than traditional homes and become popular when home prices post a big rise, sources said. They became popular in the last housing boom of the late 1980s.

But builders shied away from condo building for most of the 1990s in OC as a result of construction defect litigation and a dip in the real estate market amid a recession.

These days builders are more savvy about construction defect litigation, sources said.

This year’s list saw a lot of shuffling among the county’s top builders, with some moving far ahead of competitors and others losing ground.

Privately held No. 1 Shea Homes LP, a unit of Walnut-based J.F. Shea Co., led the pack, beating out long-time rival Standard Pacific Corp., a publicly traded company based in Irvine.

Shea moved up from the No. 2 slot on last year’s list.

The builder sold 879 houses and condos last year, up 10% from 2002.

“We had phenomenal interest rates last year, which really drove the market,” said Les Thomas, president of Shea Homes, Southern California.

He also said Shea did well in part because it sold so many condos.

“You tend to absorb attached at a higher rate than detached,” said Thomas.

And the market in 2004?

“It’s really hard to say,” Thomas said. “Last year was driven so much by interest rates. But, fundamentally, Southern California has an extreme supply and demand imbalance. The pressure on housing I think is going to remain in 2004.”

No. 2 Standard Pacific slid from the top spot on last year’s list. Its 2003 sales were off 8% to 756 units, compared to 819 a year earlier.

Still, long-time OC builders Shea and Standard Pacific both benefited last year from relationships they have built up with OC’s major landholders, Newport Beach-based The Irvine Company and Mission Viejo-based Rancho Mission Viejo LLC.

It’s also notable that both companies sold many more condos in 2003 than the prior year and significantly fewer houses. Indeed, Standard Pacific sold 284 condos in OC in 2003, a 531% rise from the 45 condos it sold in 2002.

D.R. Horton Moves Up

No. 3 Arlington, Texas-based D.R. Horton Inc. jumped five slots on this week’s list. The company sold 599 units last year, or 71% more than in 2002.

Irvine’s Western Pacific Housing, part of D.R. Horton, has bought the former Big Tee Golf Center in Buena Park and plans to convert the 26.5-acre site on Beach Boulevard into 150 homes and shops. Meanwhile, the builder has been working on a 106-home project in Anaheim Hills called Canyon Oaks.

No. 4 Newport Beach-based William Lyon Homes Inc. rose one spot, despite posting a 10% sales decline to 404 units, versus a year earlier.

Rounding out the top five is No. 5 Seal Beach-based The Olson Co., which had a meteoric rise from the No. 28 spot on last year’s list.

The company sold 396 units last year, up 866% from 41 in 2002.

Olson’s penchant for building in developed areas,what industry sources call infill projects,was a big boost last year. The developer sold 271 condos in 2003, up from 21 a year earlier.

Of course, not everybody was a winner last year.

Several companies saw sales decline in OC, which is more a reflection of selling out a development in 2002 than seeing little demand for new homes.

No. 6 Dallas-based Centex Corp. dropped two slots on this week’s list. The company saw sales decline 20% to 375 homes in 2003.

Centex is making up for fewer OC sales with building in other areas, according to Richard Douglass, president of the South Coast Division of Centex Homes based in Irvine. “We have been focused on the Corona market,” Douglass said. “We have tied up over 400 lots in Corona in the last year.”

Centex didn’t sell any condos in OC last year, which was purely a matter of timing, Douglass said.

He said the company is working on two condominium developments in Ladera Ranch, including 152-unit Sutter’s Mill, set to open in March.

Douglass also said Centex is planning a luxury condominium development at Ladera Ranch dubbed Castellina, with units starting from the mid-$600,000s.

Among the builders with the biggest declines last year was No. 14 Mission Viejo-based Lennar Homes California Inc., a unit of Miami-based Lennar Corp.

The company dropped from No. 3 a year earlier.

In the past, Lennar made a splash in OC with some big land buys, but it has built those out. Lennar grabbed a chunk of the former Tustin Marine base and has said it will go after land at El Toro.

Jeff Roos, who oversees Lennar’s OC operations as regional president, said the dip in sales last year in OC was a result of some communities selling out.

He said sales should be stronger in 2004 and 2005. Last year, Roos said, Lennar focused more on the Inland Empire, Coachella Valley and Central Valley, as well as the purchase of Newhall Ranch.

“We will do close to 5,000 homes in Southern California this year,” Roos said.

Lennar is far from becoming a minor player here.

The builder plans to open a 140,000-square-foot regional headquarters in Aliso Viejo by midyear.

Newcomers on the list: No. 12 Pardee Homes, No. 22 Bosa Development, No. 25 Brandywine Development Corp., No. 26 Woodbridge Homes and No. 27 Citation Homes.

Falling off the list: Van Daele Development Corp., Saddleback Pacific Homes Co., Avalon Homes, Etco Homes and Heritage Pacific Homes Inc.

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