Slowing economy or not, homebuilders in Orange County have it good.
With low interest rates and demand continuing to outstrip supply, they can’t produce homes fast enough. It doesn’t matter that developable land has become scarce, driving home prices through the proverbial roof. Demand has not flagged.
“Historically, we’re not anywhere near the sales marks of the late 1980s and early 1990s because of the lack of land,” said Les Whittlesey, a principal of Whittlesey Doyle Inc., a real estate advisor and land brokerage firm.
That does not mean the houses aren’t moving.
“They’re selling like hotcakes,” said Christine Diemer Iger, chief executive office of the Building Industry Association of Southern California, Orange County Chapter. “Buyers are still buying and prices are fair.”
Last year, Orange County’s 30 largest homebuilders sold 7,653 homes, a 15% increase from the 6,674 homes sold in 1999, according to figures provided by The Meyers Group, a real estate consulting firm.
Twenty of the top 30 firms posted gains while nine posted declines. One firm, No. 22 K. Hovnanian Cos., posted no Orange County sales in 1999.
For the most part, the largest companies managed sizable gains. Lennar Homes California Inc. again led the way. The Miami-based company, with a local office in Mission Viejo, grew 40% in 2000, selling 970 units.
Other gainers include familiar names plus a few new ones. Irvine-based California Pacific Homes grew 68%, selling 357 units and moving up from No. 9 to No. 7 on the list. No. 10 Brookfield Homes experienced a 107% gain, selling 257 homes and moving all the way up from the No. 19 spot. The gain, in large part, occurred due to Brookfield Homes of California Inc.’s July acquisition of Catellus Development Corp.’s homebuilding operations. Brookfield paid $147.5 million and absorbed more than 115 of Catellus’ employees.
Other big gainers include No. 15 Fieldstone Communities Inc. up 80% after moving 182 units; No. 16 Warmington Group, which moved 177 units in growing 139%; No. 2 Shea Homes Southern California (up 30% with 761 units sold); No. 3 Standard Pacific Corp., up 21% to 635 sales; No. 4 WL Homes, up 30% with 610 sales; and No. 5 Centex Homes, a 24% gainer with 527 units sold.
And new to the list are No. 22 K. Hovnanian Cos.; No. 23 Toll Brothers Inc. (which sold 102 units); No. 25 Citation Homes (with 74 sales) and No. 29 Paragon Homes (up 27% to 38 units sold).
The Orange County residential market has shown “surprising resilience,” according to Patrick Veling, president of Fullerton-based Real Data Strategies Inc., a data-analysis company and consultant to resale brokerage firms, “especially when compared to the priciest markets of Southern California, West Los Angeles and San Diego, which have been far more impacted than Orange County.”
Veling attributes the county’s performance to record low unemployment and less dependence on Internet-based industries.
However, not all news from the list is rosy. Companies losing ground include No. 9 KB Homes, which fell from the No. 2 spot. The Los Angeles company dropped 53%, selling 286 units.
Denver’s Richmond American Homes also fell on the list. The company sold 188 homes, a 25% drop from the previous year. Seal Beach-based Olson Co. fell three spots to No. 18 and saw its sales dip 19%, moving 140 homes. Irvine’s Hearthside Homes Inc. also suffered sales woes. The company fell from No. 16 to No. 26 on the list, a 61% drop on 55 units sold.
Pulte Home Corp. also lost ground, falling to No. 30 on the list.
Dropping off the list were Irvine-based New Millennium Homes (No. 11 last year); El Segundo’s Western Pacific Housing (No. 20 last year); Rielly Homes (No. 24 last year); and Irvine-based Regis Homes LP (previously No. 25).
From an employment standpoint, builders experienced modest gains. The total workforce of the 30 firms on the list grew 6% last year to 3,008.
Brookfield Homes witnessed the largest growth with its acquisition of Catellus Development Corp., but other builders saw significant changes. Standard Pacific Corp. grew 13% to 250 employees and No. 18 Beazer Homes grew to 134 employees, a 34% increase. Interestingly, Pacific Bay Homes dropped its staff 72%,down to just 21 employees,while experiencing a 131% increase in sales.
For now, OC’s quality of life and traffic navigability compare favorably with Los Angeles, Northern California and San Diego. However, as land becomes more scarce, builders may feel the effects.
Already, companies such as Hearthside Homes have shifted their focus to more land-friendly areas like the Inland Empire. And a look at the number of projects reveals cause for concern. The number of projects in Orange County in 2001 dropped 7% from the previous year, to 188. n
