Three Major Projects Opened in 1999; More Are Planned for Coming Months
The Orange County residential market was characterized by record-setting events during 1999, including the grand opening of three masterplanned communities, planned redevelopment of former commercial sites and price appreciation of new and resale housing.
Last year, potential homebuyers flooded new-home sales offices at Northpark, Ladera and Talega to vie for the purchase of a new home and to evaluate the remarkable number of choices in community planning and home design, which each of the respective developers,The Irvine Co., Rancho Mission Viejo Co. and Talega Associates,and their participating homebuilders offer.
At the same time, other residential land developers continue their work to complete the planning and entitlements necessary to redevelop several large parcels that were formerly used by oil and gas companies, federal agencies and farmers.
These efforts, not surprisingly, come at a time when OC is experiencing continued population and employment growth, which is driving demand for housing to record price levels.
The biggest events that occurred in OC’s housing industry in 1999 were the grand openings of Ladera, Talega and Northpark. When completed, these masterplanned communities will cover 7,722 acres and provide homes to more than 13,700 families.
Of particular interest is that each of these communities is being developed by a different landowner.
Northpark, off I-5 between Culver Drive and Irvine Boulevard, is being developed by the Irvine Co. as a “classic California residential village reminiscent of Southern California’s classic neighborhoods in Pasadena, San Marino and Glendale.” This 212-acre, 1,626-unit gated development will consist initially of nine residential projects priced from the high $100,000s to more than $750,000. Centex Homes, Greystone Homes, Beazer Homes, Standard Pacific Homes, Lennar Homes, California Pacific Homes, Warmington Homes California, Richmond American Homes and Taylor Woodrow Homes are building houses ranging from 950 to 4,400 square feet.
Ladera, off I-5 between Crown Valley Parkway and Ortega Highway, is a 4,000-acre project that will provide homes to 8,100 families at buildout. It is being developed by Rancho Mission Viejo Co. in a village concept, the first of which is Oak Knoll. This village is characterized by a rich variety of styles from California’s golden age of architecture, including Craftsman, Cottage, Spanish Colonial, American Farm House, Traditional, Italianate and Prairie. This first village will consist of 10 projects priced from the low $200,000s to more than $550,000. Shea Homes, John Laing Homes, William Lyon Homes, Sea Country Homes, Brookfield Homes, Standard Pacific, Warmington and Taylor Woodrow are building houses ranging from 1,349 to 4,082 square feet.
Talega, 1.5 miles off I-5 via the Avenida Pico exit, is being developed by Talega Associates, a joint venture of Standard Pacific Homes, Catellus Residential Group and Starwood Capital Group. Talega is a 3,510-acre development totaling 4,000 home sites designed around the rolling hills and valleys on the eastern edge of San Clemente (see related story on page 1), approximately three miles from the ocean. Homes are priced from the low $200,000s to more than $800,000 and will range from 1,367 square feet to 4,100 square feet. Catellus, Standard Pacific, Shea, William Lyon and Lennar are the homebuilders.
As a result of these projects, OC homebuyers are benefiting from the competitive spirit that arises when first-class developers and homebuilders showcase their talents in the same marketplace.
And there are more on the way in the coming months.
Crystal Cove, bordered by the Newport Coast masterplanned community and Pacific Coast Highway, is being developed by the Irvine Co. as a gate-guarded “Santa Barbara resort-style enclave.” This 600-acre, 800-unit development will initially consist of four residential projects priced from just under $1 million to more than $2.4 million. Greystone, Standard Pacific, Richmond American and Taylor Woodrow are scheduled to build homes ranging from 2,900 square feet to approximately 5,200 square feet and open during the spring and summer of this year.
Forster Highlands, in San Clemente off the Camino de Estrella exit from the I-5, is being developed by John Laing Homes and Institutional Housing Partners as a “country coastal” community. This 1,005-acre, 1,037-unit development will consist initially of six residential projects priced from the $300,000s to more than $600,000. Kaufman & Broad, Citation Homes, William Lyon, Shea and John Laing are scheduled to build homes ranging from 1,600 square feet to more than 4,000 square feet and open in the spring.
Meanwhile, in already-developed areas of the county, recycling is the name of the game.
The redevelopment of commercially or agriculturally zoned properties to a primarily residential use will continue so long as residential is the highest and best use for specific parcels. Given the demand for housing in OC, this type of development is projected to continue and even escalate in some submarkets. A review of the The redevelopment of commercially or agriculturally zoned properties to a primarily residential use will continue so long as residential is the highest and best use for specific parcels. Given the demand for housing in OC, this type of development is projected to continue and even escalate in some submarkets. A review of the planned and proposed masterplanned communities (see chart below) reveals that several of these developments are planned for land formerly occupied by oil and gas companies (Fullerton, Brea and Yorba Linda), federal agencies (e.g. El Toro and Tustin) or agricultural entities.
The list also shows several planned for more problematic, environmentally sensitive sites (e.g. Huntington Beach, Dana Point and Seal Beach). As the market for developable land tightens and home prices rise, the more difficult sites begin to be evaluated for redevelopment.
However, redevelopment to a residential use is not dictated solely by the projected demands for housing. It is also affected by policies of local city councils and planning departments, which can be influenced by citizens’ concerns about the environment or the effects of growth. As a result, city agencies and the county have to balance the benefits of increased sales and property tax revenue against the costs of providing services to redeveloped area; while residents have to balance the benefits of open space and limited traffic increases against the economic costs of an inability to provide affordable housing or a stifling of business expansion.
Meanwhile, in contrast to the late 1980s and early 1990s, lending institutions are continuing to adhere to sound underwriting policies in determining whether or not to provide acquisition, development and/or construction loans to homebuilders. These include maintaining conservative criteria such as loan-to-cost/value ratios, higher and minimum cash equity requirements, smaller construction phases releases and meaningful credit enhancements. The practice of applying relatively conservative underwriting with thorough economic analysis of each residential development’s real estate fundamentals is appropriately restraining the supply of capital to those residential projects that justify development and is effectively preventing oversupply and speculative housing development (a.k.a. standing inventory). As a result, Orange County’s housing boom should continue at a moderate pace for the foreseeable future and arrive at a “soft landing” when the economy experiences its next contraction.
Bergstrom is an analyst at E & Y; Kenneth Leventhal.
