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Homebuilders Record Fourth Year of Declining Sales

Orange County’s homebuilders hope that they’ve hit rock bottom, after posting the slowest year for sales that the area’s seen in recent memory.

The county’s 31 largest homebuilders sold 1,477 new homes and condominiums in 2009, a 22% decline from a year earlier, according to this week’s Business Journal list.

It’s the fourth consecutive year of declining sales for OC’s largest builders, which have seen sales slow in the face of the economic downturn, affordability issues and a dearth of larger master-planned communities breaking ground.

Eleven builders returning to this year’s list saw a drop in sales from their 2008 levels. Nine companies from 2008’s list dropped off altogether after reporting minimal local sales or going out of business last year.

Both single-family and condominiums registered big drops in sales last year.

There were 637 single-family home sales here by companies on this year’s list, an 18% drop from a year earlier. As recently as 2005, there were 2,700 sales of new, detached homes here.

Condo and townhomes fell 25% for the year, to 840 sales. Despite the drop, it’s the fourth year in a row that attached new home sales outnumbered those of detached homes.

Data for this year’s list was provided by the Costa Mesa office of Washington, D.C.-based Hanley Wood LLC. The average new home sold in OC last year cost about $630,000, an 8% decline from a year earlier, according to the research firm’s figures.

Condo developers and their lenders are making tough choices to ride out the down market. A large percentage of the 3,800 apartments units that opened here last year were initially eyed as condos but converted into for-rent units as the sales market remained in the doldrums.

The largest condo tower in OC, Santa Ana’s Skyline at MacArthur, looks likely to follow suit this year, with its 349 high-end units expected to be turned into rental units if a $125 million sale to Palo Alto-based Essex Property Trust Inc. is completed as planned next month.

The past few years haven’t been pretty for builders. In 2008, homebuilders saw a 24% decline in sales to 1,900 units—the first time total local sales failed to top the 2,000 mark in recent memory.

Two builders—Irvine-based John Laing Homes and Phoenix-based Opus West Corp.—fell off the list after filing bankruptcy and shutting down operations. As recently as three years ago, John Laing was the No. 3 homebuilder in OC, in terms of sales.

At least one other company still on this year’s list, No. 15 Hearthside Homes Inc., part of Ir-vine-based California Coastal Communities Inc., is operating under bankruptcy protection. The company, which is selling homes near the Bolsa Chica wetlands in Huntington Beach, sold 32 homes last year at an average price of $1.1 million.

Hearthside is one of four builders on the list whose 2009 average sale price exceeded $1 million. Others include No. 9 Toll Brothers Inc., No. 11 Standard Pacific Corp., and No. 17 Geoffrey H. Edmunds & Associates.

Last year’s results pale in comparison to new home sales seen in the mid-1990s, when sales topped 10,000 homes, or the late 1980s, when 15,000 deals a year were the norm.

In the past decade, the peak selling years were 2002 and 2003, when annual sales approached 7,000 new homes, buoyed by new master-planned communities in Ladera Ranch, San Clemente and on the Irvine Ranch.

In 2002, the top two builders in the Business Journal’s list—Standard Pacific and Shea Homes, part of Walnut’s J.F. Shea Co.—sold a combined 1,638 homes, or more than the combined sales for all 31 companies on this year’s list.

Despite a nearly 30% year-over-year drop in sales, Shea Homes took the No. 1 spot in this year’s list, supplanting Miami’s Lennar Corp., which had held the top spot for three years running.

While it’s at the top of the latest list, Shea’s numbers aren’t near its levels in 2002, when it sold 489 homes and 316 condos. It sold 76 single-family homes and 89 townhomes and condos last year in a handful of projects around Aliso Viejo, home of sister company Shea Properties, as well as in La Habra. Shea averaged about $620,000 per sale.

No. 2 Lennar, whose homebuilding operations are largely run out of Aliso Viejo, totaled 158 total sales last year—a 35% drop from 2008 levels—at an average of $534,000.

Lennar has the largest local land holdings of any builder on the list, but it has opted to slow down construction during the downturn, in addition to mothballing sales at some completed projects.

Construction in Yorba Linda helped propel two companies on this year’s list .

Toll Brothers—which sold 68 homes last year, up from just one in 2008—currently has sales under way at four OC developments, all in Yorba Linda, which has seen an uptick in construction and building permits since suffering home loses in the fires of 2008.

Shapell Homes, part of Beverly Hills-based Shapell Industries Inc., moved up six spots to No. 4 on this year’s list with 127 units sold, a 95% increase from a year earlier. Sales were from several projects in Yorba Linda and Laguna Niguel.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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