Standard Pacific Corp.’s strategy of diversifying beyond California is being put to the test.
Since 2002, the Irvine-based homebuilder has pushed deep into Florida. It’s also bought its way into the Carolinas and expanded in Arizona.
The goal: to become less dependent on California’s fortunes and more of a national company.
Along the way, Standard has gone from one hot market,California,into several that are seeing double-digit rises in home prices.
California, Arizona and Florida made up 79% of Standard’s new home orders, or contracts to buy homes being built, in July and August.
“They are definitely in the hotter markets,” said Joel Locker, an analyst with Carlin Financial Group in New York. “They kind of have gotten punished for it already.”
The company’s market value of about $2.5 billion last week is off nearly 25% from July’s peak, though Standard’s shares still are marginally up for the year.
Another issue, according to Locker, is Standard’s backlog of homes sold but not yet finished. It rose 7% in dollar value in the second quarter from a year earlier. The increase for other large builders in the quarter was 30%, he said.
Limited backlog growth could signal lower revenue and profits in the next two or three quarters, according to Locker.
Standard could show a backlog gain in its third-quarter results due on Thursday, Locker said.
The company and other homebuilders face the prospect of a shift in the housing market, spurred by higher interest rates, which are working their way down to mortgages.
The rate on a 30-year fixed mortgage earlier this month rose to more than 6% for the first time since March. Economists contend that another half-point increase could cause home prices to fall in some markets, including parts of Florida and Phoenix.
Florida accounted for nearly 30% of Standard’s new home orders in July and August.
Most of Standard’s building in Florida is in the Jacksonville area, according to the company’s Web site. The site lists 11 developments where Standard is putting up homes, with prices ranging from $200,000 to $460,000.
Home prices in-creased 18% in Jacksonville in the second quarter versus a year earlier, according to the Office of Federal Housing Enterprise Oversight, which tracks markets na-tionwide.
That price jump was the largest recorded for Jack-sonville, according to Marisa DiNatale, an economist with Economy.com Inc.
Rising home prices in Jacksonville are in line with area incomes, a lot more so than in Miami, according to DiNatale.
Jacksonville’s 3.7% unemployment rate rivals Orange County’s 3.8%.
The two areas diverge on home prices: the median in Jacksonville was $165,000 in the second quarter.
OC’s median for September was $610,000.
The median for all of Florida in the second quarter was $242,000.
The Jacksonville area is unlikely to see home prices decline, according to DiNatale.
As for another key Standard market, Phoenix, prices have moved sideways in recent months, according to analyst Locker. Data from an area brokerage showed price growth peaked in June with 43% appreciation from a year earlier.
California remains the largest variable. A third of Standard’s new home orders in July and August were in the Golden State.
There are signs of a slowdown in rising prices here but so far there’s no indication of falling values. A combination of slowing in California and Florida could stifle Standard’s earnings growth.
For the third quarter, analysts expect Standard to post $90 million in profits, up 23% from a year ago. Sales could come in at $957 million, up 10% from a year earlier.
