Dan Young took the top spot at the housing development arm of Irvine Company in late 2007, just in time to see the market for new homes grind to a halt.
“That was no fun,” said Young, a former Santa Ana mayor who’s been with Irvine Co. for nearly a decade. “But we didn’t go into a shell.”
Now Irvine Co. is starting the first big housing development with Young’s fingerprints on it, a 685-home project near the former El Toro Marine base.
Plans for the homes at the Woodbury and Woodbury East developments were laid during the downturn. The project is a bet on demand for new Irvine homes in a slowly rebounding housing market.
Sales are set to start early next year. Some construction is under way.
Irvine Co. hopes to sell all of the homes within two years, according to Young, president of Irvine Co.’s community development division, which directs development of homes, parks and shopping centers on company land.
“There’s virtually a shortage” of housing in Irvine, said Young, who’s quick with numbers to make his point.
As of October, there were 474 existing homes for sale in Irvine, according to San Diego-based market tracker MDA DataQuick, a unit of Canada’s MacDonald, Dettwiler and Associates Ltd.
The number of homes for sale in the city hasn’t been that low since February 2005. At the peak of the housing market, the number of homes for sale in Irvine was about 1,300. A year ago, there were more than 800 homes on the market.
Many of the homes for sale are more than 20 years old and aren’t seen as competing with Irvine Co.’s new homes, according to Young.
The number of newly built homes also has declined as homebuilders have pulled back.
Other than Irvine Co.’s ongoing Portola Springs development in northeast Irvine, most new homes for sale in Irvine are high-rise condominiums near John Wayne Airport.
“That’s not our market,” Young said.
Building remains sparse.
Through September, there have been 135 building permits issued this year for detached, single-family homes in Irvine, according to the Burbank-based Construction Industry Research Board.
There have been 955 single-family home permits issued for the county as a whole so far in 2009, a 70% drop from 2006, according to the research board.
Yorba Linda has been the most active OC city in 2009, with 152 building permits issued through September, in part because of rebuilding after fire hit the area a year ago.
Sales of homes and interest in them at Irvine Co.’s lower-priced Ivy development at Woodbury East helped spur the decision to move ahead with larger plans, Young said.
Different Format
In a departure from previous projects, Irvine Co. is paying builders to put up homes.
Under what the company calls its “executive builder” program, five builders have been picked to put up the homes in seven neighborhoods. The builders are expected to be paid 3% to 6% of each home’s price.
Irvine Co. traditionally has sold lots to builders that put up homes according to specifications set by the company.
The five builders in the program are Fairfax, Va.-based Brookfield Homes Corp., Los Angeles-based KB Home, Irvine’s New Home Co., Newport Beach-based Tri Pointe Homes Inc. and Riverside’s Van Daele Homes.
Miami-based Lennar Corp. also is building townhomes in Woodbury but isn’t part of the executive builder program, according to Irvine Co. officials.
When the company began drawing plans to begin building in earnest again, “our only concern was whether the homebuilders would have the capital to build,” Young said. “We decided to step in ourselves.”
A conservative estimate puts the company’s investment in the project at $300 million.
The project doesn’t stand to be as profitable as land sales made to builders during the peak, which in some cases went for as much as $5 million an acre.
But Irvine Co. officials said they still see the program as a money maker.
“It should be a very profitable program for us,” Young said. “Prices are (down), but the cost of construction also is down. We’re able to find the profit margin.”
The homes are set to sell for $300,000 to $900,000.
