The good news first.
Irvine-based homebuilder Standard Pacific Corp. still is on track to post its third-most profitable year in the company’s 30-year history, according to Chief Executive Stephen Scarborough.
After that, it gets a little tough finding good news.
The company reported third-quarter earnings late last month, amid what it politely described as “challenging market conditions” in homebuilding.
Standard Pacific’s latest results reflected those challenges.
Earnings fell to $30.8 million from $96.4 million a year earlier. Most analysts were expecting profits of up to $44 million.
Earnings were hit by an 18% decrease in completed new home sales, including a 7% decline in California.
There were a number of other eye-opening numbers in the third-quarter report.
New home orders, or contracts to buy a Standard Pacific home, were 1,200 in the quarter, a 58% decrease from a year ago. In Southern California, new home orders were off 72% from a year earlier, even though Standard Pacific was building at 28% more developments than a year ago.
On the upside, there was a 9% yearly increase in the company’s average home price, to $368,000. In Southern California, prices increased 16%, to $747,000.
Standard Pacific’s main markets,California, Arizona, Texas, Nevada and Florida,are among those seeing the biggest sales declines. It seems the company is feeling the brunt of the changing national housing mood as much as any builder.
Standard Pacific’s cancellation rate for the third quarter was 50% of orders, compared to 18% a year ago.
Analysts participating in the company’s quarterly conference call said Standard Pacific’s cancellation rate saw the biggest jump of any big homebuilder.
The main reason for the increase: Buyers aren’t able to sell their existing homes, Scar-borough said.
The company is adapting to the changing market. Expect to see a reduction in Standard Pacific’s land holdings next year, Scarborough said.
Standard Pacific also is offering more incentives and discounts on its homes.
In San Diego County, Carlsbad homes in the $1.2 million to $1.4 million range now are seeing price cuts as much as 20%. Less expensive condominiums at around $500,000 are seeing cuts in the 15% range.
The lower prices have helped stabilize the company’s business in Southern California, even if there isn’t much evidence the regional housing market is turning around, company officials said.
“There’s been some pockets of good results” in recent weeks, Scarborough said. “There’s a little (more) optimism.”
Luxury Brokerage Starts Up
Local home sales may be slowing. And higher-priced homes are sitting on the market even longer.
That hasn’t deterred Gary Legrand, who thinks it’s the perfect time to start a brokerage specializing on selling homes along the coast. He’s the president of Surterre Properties, based in Newport Beach.
The company is starting with 25 agents. Legrand is looking to get that number up to 100 in the next six to eight months. The company will handle homes selling for $400,000 to as much as $30 million.
Luxury homes aren’t new to Legrand. He used to head up the Newport Beach/Fashion Island branch of Coldwell Banker.
He’s entering a competitive market. Another Newport Beach brokerage, H & #244;m Real Estate Group, started in March and targets much of the same business that Surterre will be going after.
They’ll both have to compete with the likes of Newport Beach-based John McMonigle. The Coldwell Banker agent is known for grabbing big local listings like the $75 million Corona del Mar home now on the market.
What’s the trick to selling in today’s market?
“The key is, if the property is priced right, it will sell,” Legrand said.
A Fountain Valley shopping center recently traded hands for $14 million.
Mariposa Plaza, a 39,600-square-foot center on Brookhurst Street near the San Diego (I-405) Freeway, was sold to a Newport Beach investment group calling itself Mariposa Plaza LLC for about $353 per square foot.
Rancho Mirage-based GMN Co. was the seller. Sharon Browning and Mehran Foroughi of Sperry Van Ness represented both parties.
The three-building center was built in 1987 and is on 3.8 acres. The center is 98% full with tenants including Hoag Healthcare, Tarbell Realtors, CitiFinancial, Edward Jones Financial and Togo’s.
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