Homebuilders Standard Pacific Corp. of Irvine and Newport Beach-based William Lyon Homes are seeing fewer orders for new homes in California.
In the past, drops in California orders usually meant the homebuilders just weren’t building at as many developments amid the scarcity of land in Orange County and other markets. Demand wasn’t an issue.
But now, after years of rising home prices, tempered demand seems to be part of the equation, particularly in OC.
In the third quarter, Standard Pacific saw Southern California orders fall 12% to 386 from a year earlier.
The decline was “due primarily to slower sales in Orange County, while sales activity was healthy in our Inland Empire, San Diego and Ventura divisions,” the company said in a release.
Builders record new home orders when a buyer enters a sales contract for a house.
Investors and analysts look to orders for sales and profit projections.
“It seems like (OC) has seen the most rapid increase in prices over the last couple of years,” said Andrew Parnes, executive vice president of finance and chief financial officer at Standard Pacific. “We feel that buyers are just reacting to that runup in prices.”
William Lyon, which does much of its building in California, saw orders drop 33% to 659 in the third quarter from a year ago.
The company doesn’t break out Southern California in its quarterly reports. It did report a 50% drop in California orders to 318 homes.
Having fewer homes for sale was part of the reason for the decline. But William Lyon also cited slower sales “in certain of the company’s markets,” according to a release.
“Orange County certainly is one of the slower markets we are in right now,” said Wade Cable, president of William Lyon.
The reason is affordability, according to Cable.
Demand has pulled back some, but “I wouldn’t go to early-1990s terms,” he said.
“At the right price, the market seems to be very good,” Cable said.
In September, OC’s housing market saw another month of higher prices. But the number of homes sold posted the biggest decline in the Southland, according to La Jolla-based market tracker DataQuick Information Systems.
Sales here dropped 28% to 3,585 houses and condominiums, versus a year ago. The median price of a home here was $533,000, down 2% from a month earlier, but up 24% from a year ago.
The second biggest decline came in Ventura County, where sales dropped by 19%. Los Angeles and San Diego counties both declined less than 10%. Inland Empire counties increased slightly.
Most Bay area counties, which slumped during much of the Southland’s boom of the past few years, saw sales rise in September.
Standard Pacific saw a slight gain in orders in Northern California in the third quarter.
A downturn in OC sales could have an impact on Standard Pacific and William Lyon. Stellar price gains and robust sales here have fueled profits at the homebuilders.
Both companies have benefited from strong ties to the biggest landowners here: The Irvine Company and Rancho Mission Viejo LLC.
Standard Pacific also has invested in San Clemente’s Talega development, assuring it lots to build on in one of the county’s larger and more lucrative housing projects.
Even with a regional decline, Standard Pacific still logged a record number of orders for new homes in the third quarter, thanks to gains in other markets.
Buyers placed orders for 2,474 Standard Pacific houses and condos, up 15% from a year earlier and the best ever for a third quarter, according to the builder.
For Standard Pacific, operations in Arizona, Colorado and Texas and recent acquisitions in Florida and the Carolinas have paid off.
“We continue to see healthy demand in a number of our markets,” Parnes said. “We embarked on that growth and diversification strategy around 1997 and 1998. It started by our entrance into Arizona in 1998.”
William Lyon sells homes in California, Nevada and Arizona. The Golden State made up about half of orders in the third quarter and about 75% by sales price.
The company also saw fewer third-quarter orders in Nevada, where they slipped 34% to 149 from a year earlier.
William Lyon’s Cable blamed the falloff on a lack of developments to build at in the Las Vegas area, which has been among the hottest housing markets.
The company got some good news from Arizona, where orders more than doubled to 192 homes.
“Phoenix is off the charts,” Cable said.
As for Standard Pacific, its biggest boost in orders came from Florida, despite recent hurricanes. Orders rose 50% in the Sunshine State to 710 homes.
Florida accounted for nearly as many orders as California, which saw orders dip 6% to 761 homes.
