New Home Co. isn’t cutting the prices of its homes in half, though it may seem that way based on a reading of the Aliso Viejo-based builder’s financials.
“Two years ago, our home prices averaged about $2 million. A year ago, it was about $1.6 [million]. This year, we’ll be in the $975,000 to $1 million range,” said Chief Executive Larry Webb.
“Moving forward, we’re going to be even lower than that.”
The switch is the result of a strategy change: fewer luxury homes along the Orange County coast and more offerings where land and homes are cheaper.
I spoke with Webb last month before his company (NYSE: NWHM) opened its latest community of homes in the south Corona development of Bedford.
New Home is the master developer at Bedford, and is one of several builders putting up homes in the first phase of the Riverside County project, which will total 1,600 homes, and is focused on more affordable offerings for first-time homebuyers.
The New Home offerings start at about $600,000. Other homes include those by Irvine-based TRI Pointe Group Inc. (NYSE: TPH) and Woodside Homes of Riverside starting around $300,000 and $500,000, respectively.
A couple of years ago, New Home was showing off a collection of homes in Newport Coast’s Crystal Cove community priced $5 million and higher. Those sold fast, but finding spots like Crystal Cove to build more product is nearly impossible now, Webb said.
“The incredible locations are going away.”
The Corona project is part of a concerted effort to cut the average sales price of New Home offerings, according to Webb. Building more affordable product results in a faster sales pace and lower construction costs than on the high end of the market, he said.
The timing appears right; there’s increasing local talk that the pace of sales for higher-priced homes in Orange County is slowing, as I reported in last week’s Business Journal.
New Home’s strategy isn’t a reaction to the recent trends—the plan has been in the works for a few years, around the time the Crystal Cove homes were being prepared for market, Webb said. “It’s been a three-year process.”
More affordable offerings are “the deepest part of the market,” said Webb, whose Inland Empire offerings on average should be $700,000 or less.
More’s on the plate in the IE, outside Bedford, he said. “Three to four years from now, we’ll be one of the largest builders in the Inland Empire.”
A few good spots in OC remain for high-end homes, Webb noted. In the Sky Ranch at Covenant Hills community of Ladera Ranch, his company has presold the first nine homes, though the community doesn’t officially open until next month. Homes there start at about $2 million.
KBS to KBS
A 21-building portfolio of offices and industrial buildings in Redmond, Wash., owned by an affiliate of Newport Beach-based KBS Realty Advisors, has seen a big run-up in price in just two years.
The real estate investor disclosed in regulatory filings that its KBS Strategic Opportunity REIT affiliate recently sold the 778,472-square-foot Westpark portfolio of properties, which are on 41 acres about 15 miles east of Seattle. They are batches of buildings Westpark Business Park, Redmond Center Court, and Pacific Business and Technology Center.
KBS Strategic, a nontraded real estate investment trust, paid about $128 million for the portfolio in 2016. Late last month it sold it for $169.4 million, or about $218 per square foot.
The latest buyer is another KBS-related affiliate—Keppel-KBS US REIT, a venture between KBS and a real estate unit of Singapore-based conglomerate Keppel Corp.
The office investor’s shares are traded on Singapore’s main stock exchange, the SGX, but it focuses on buying and managing U.S. properties.
The Keppel-KBS offering was listed on the SGX last year, and is one of only a handful of REITs on the exchange focused on U.S. real estate.
A Bloomberg report this past summer said KBS is considering a second SGX offering that “aims to raise at least $1 billion from a potential sale of trust units backed by at least 15 prime commercial properties.”
The listing could take place by year-end, the report said. Specific properties that would be owned by the new fund haven’t been disclosed.
