2010 stands to be busier, if not necessarily better, for local real estate.
Among homebuilders, a few are starting to take steps back into the market, even though the majority of construction at big projects such as Irvine’s Heritage Fields, Anaheim’s Platinum Triangle and Tustin’s Legacy Park still are years away.
Next year, $885 million worth of building permits for apartments and homes are forecast, up 13% from what’s estimated for 2009, according to Chapman University.
During the boom, the county peaked at $2.3 billion in home building in 2006.
In commercial real estate, the volume leasing and building sales are expected to rise next year—at even lower prices than what’s being seen now.
“Office and industrial activity is up, that’s the first step,” said Kurt Strasmann, managing director of brokerage services for the Orange office of Voit Real Estate Services.
Tenants and buyers will continue to have the upper hand. Landlords are likely to see more vacancies and falling building values, albeit at a less alarming rate than in 2009.
The county is projected to add about 1,000 jobs, all in the second half of the year. That’s a big change from the 62,260 estimated job losses in 2009. But it isn’t the kind of growth that’s likely to spur a commercial real estate rebound.
Office lease rates are projected to fall another 10% to 15% next year, according to Voit. Prices for office buildings, which in some cases are half of what they were at the recent peak, could drop another 10%.
Odds are the housing market, which went into decline earlier, will pick up in 2010.
Irvine’s Standard Pacific Corp., the largest homebuilder based in the county, said it hasn’t had to cut prices or up incentives in months at its local housing projects.
Prices are stable for some homes in the $1 million range, said Ted McKibben, president of Standard Pacific’s Orange County division. But it’s still a struggle to find buyers for the most expensive homes, he said.
A few market watchers predict a turnaround in home prices next year. Among the most optimistic, Santa Ana-based First American Corp.’s First American CoreLogic said OC homes prices could increase some 10%.
Chapman University economists predict OC’s median home price will rise by about 5%, slightly below the statewide forecast of 5.8%. In 2009, home prices here are estimated to end the year 12% lower than 2008.
The county’s median home price—now about $436,000 after rallying the past few months—is down nearly a third from the peak of the market in June 2007.
How many foreclosed homes come up for sale next year will play a role in pricing. Irvine-based auctioneer Real Estate Disposition LLC is gearing up for another busy year.
“I think there will be another wave” of foreclosures, Chairman Rob Friedman said.
Most homes financed with subprime loans appear to have worked their way out, he said. Other types of risky loans made for higher-end homes—such as Alt-A loans, negative amortization loans and other no-equity lending—have yet to hit the market in earnest, Friedman said.
COMPANY TO WATCH: FIRST AMERICAN CORP.
It’s taken longer than expected, but San-ta Ana-based First American Corp. looks poised to complete a long-awaited spinoff in 2010.
The deal is likely to be the county’s largest on Wall Street next year.
In early 2008, First American announced plans to separate its financial services operations, including its core title insurance business, into a publicly traded company.
First American’s remaining operations, including its faster-growing business providing real estate data, are set to remain at the existing holding company.
The spinoff, derailed by the housing downturn, now is on track again. First American officials are optimistic it could take place by April.
But the company, which had a market value of $3 billion last week, has a hole to fill first. Last week, the company said Frank McMahon is leaving. He was set to run First American’s remaining business. A search is under way for his successor.
—Mark Mueller
PERSON TO WATCH: DAN YOUNG
Dan Young is set to be a harbinger of the housing market in 2010.
The president of Irvine Company’s community development division is pushing ahead with plans for homes in Irvine and has hired homebuilders to put them up.
It’s an early move in a bet on a rebounding housing market.
The company’s plans for 685 homes near the former El Toro Marine base are Irvine Co.’s first big housing development in several years.
It’s also the first company project to kick off in earnest since Young took over the top spot at the company’s housing development arm about three years ago, just as the market for new homes crashed.
Sales at the project are set to start early next year. Some construction is under way.
Young’s taking some extra risk. Under what Irvine Co. calls its “executive builder” program, five builders have been hired to build the homes for a fee basis. In the past, Irvine Co. sold land to builders that put up homes to company specifications.
“We were willing to take the risk—when most people were on the sidelines watching,” Young said.
—Mark Mueller
