A nationwide push for more affordable housing and gaps between phases of development at the area’s largest master-planned communities contributed to a sizeable drop in home sales last year locally.
The area’s top 20 homebuilders sold 3,705 homes in Orange County last year, a 19% drop from the year prior, according to this week’s Business Journal list.
Still, builders are striking an optimistic tone on the market moving forward, both in OC and nationally.
“What a difference a year makes,” said Leonard Miller, who took over from Larry Webb as chief executive of the New Home Co. (NYSE: NWHM) in August. “The market has greatly improved since the beginning of last year, with many homebuilders reporting the best sales they’ve seen during this market cycle.”
Millennial Boom
Aliso Viejo-based New Home Co., No. 10 on this year’s list, is one of several local builders making a shift to more affordable offerings: a move that’s seen them up their presence in the Inland Empire while cutting back on pricier offerings in OC.
“We have always been known as a luxury builder, but we are now focused on bringing down our price point for higher-density, smaller products,” said Miller. “Of our planned 18 communities, 13 are planned to be below FHA limits,” which now run about $766,000 in Orange County and $510,000 in Riverside County; the Inland Empire is a growing source of business for the builder.
Coinciding with this push for more affordable homes, is growing demand from a newer demographic: millennials.
A recent economic report by realtor.com predicted millennials, or those born between 1981 and 1997, to drive the national housing market in 2020, especially for entry-level homes. Some 4.8 million millennials are turning 30 in 2020, “peak home buying age,” the report notes.
“For the first time ever, millennials’ share of mortgage originations will surpass 50% in the spring, outnumbering Gen X and baby boomers combined,” the report said.
Miller noted that this entry-level segment is among the fastest-growing product types, with “younger buyers starting to come off the sidelines.”
“They’re looking for innovative designs with technology embedded within the home,” Miller said.
Mariner’s Square Project
One newcomer to this year’s list at No. 15, Vancouver-based Intracorp Homes, was one of eight builders on the list posting gains in home sales in 2019.
“There’s no question that this is a competitive marketplace, but we are definitely getting our fair market share as we’ve seen a continued uptick in sales volume, especially in the past few months,” Division President Brad Perozzi said.
The builder opened several infill developments near John Wayne Airport last year. The newest to wrap construction is MDL, a 137-unit gated townhome project in Irvine that launched during the second half of 2019. Prices there start around $600,000.
The developer also revealed plans for a new project in Newport Beach, pairing up with Walnut’s Shea Homes (No. 3 on the list) to redevelop the 114-unit Mariner Square apartment site along Irvine Avenue.
The duo closed on the former Irvine Co. property at the end of last year for $58 million or $10 million an acre, and will build 92 residences on the 5.8-acre site. Intracorp is building 36 townhomes and Shea will build 56 paired homes. Pricing hasn’t been announced.
Top Sellers
Lennar Corp. retained the No. 1 spot on the list, delivering 848 homes, a roughly 1% increase from 2018. The Miami-based homebuilder is among the largest builders at FivePoint Holdings’ Great Park Neighborhoods in Irvine.
Horsham, Pa.-based luxury builder Toll Brothers saw sales fall nearly in half in 2019, but still took the No. 2 spot thanks to its work at Irvine’s Altair and Orchard Hills developments, among other spots.
Irvine Pacific, the in-house builder for Irvine Co.’s master-planned communities on the Irvine Ranch, sold 261 homes in 2019, a 44% drop but still good enough for No. 4 on the list.
Newport Beach-based William Lyon Homes (NYSE: WLH) is the sole builder at the 536-unit Novel Park development in Irvine, the largest new community to open in OC last year. The company’s 224 sales in OC was good for No. 5 on the list.
Larger projects will open in Irvine and Rancho Mission Viejo’s master-planned communities this year and will likely result in higher countywide sales totals for 2020.
William Lyon’s place on the list was trailed by its soon-to-be owner, Scottsdale, Ariz.-based Taylor Morrison Home Corp. (NYSE: TMHC). When combining the two companies, which will formally align next quarter, they sold 420 homes in 2019, which would have made them No. 2 among homebuilders.
The 20 builders in OC employ about 2,000 people locally, down 3.3% from a year ago.
