Local homebuilders and developers enter 2021 on a wave of optimism, with the biggest challenge finding land in Orange County to build more homes, especially less-expensive offerings.
The top 21 builders in OC last year sold a cumulative 3,423 attached and detached homes, according to this week’s Business Journal list.
While that figure is down 4.4% from year-ago levels, 2020 was effectively only a 10-month selling season, as the pandemic halted business in its tracks in March and April.
After a lull in the market following stay-at-home orders first issued a year ago, the market quickly rebounded and by all indications has remained hot in the new year.
Emile Haddad, chief executive of FivePoint Holdings LLC (NYSE: FPH), has seen stronger home sales in 2021 over 2020, which he attributes in part to the close of the election year.
“Many appeared to be on the fence, and are now taking action,” Haddad said. “I don’t see any slowdown in sight.”
Flight from Downtown
Orange County emerged as an in-demand location for home shoppers looking to relocate from denser metro areas, offsetting a flight to more affordable markets for some cost-conscious locals, industry officials said.
Low interest rates helped generate interest as well.
Builders clearly gravitated toward more affordable offerings in the area, as sales of new attached condos and townhomes saw a 26% increase in sales last year, to 1,540. Stand-alone home sales fell 18%, to 1,886.
A lack of new home inventory is compounding buyer interest, and impacting the prices they’re willing to pay, market watchers say.
“There are not enough homes on the market to keep up with today’s intense buyer demand,” notes The Orange County Housing Report compiled by local economist Steven Thomas.
“In looking closely at the housing economic model of supply, demand, mortgage rates, affordability, buyer demographics and market velocity, the data illustrates that the current trajectory of the housing market is not going to change anytime soon.”
Lennar Corp., whose West Coast base is in Irvine, took the top spot again for sales last year despite an 18% decline, with 698 sales.
Sales continue for the company at numerous area projects, from Lake Forest to Anaheim’s Platinum Triangle. It’s also an investor and frequent builder in the Great Park Neighborhoods.
No. 2 was Taylor Morrison, with 361 sales last year. The Scottsdale, Ariz.-based firm’s nearly 80% boost came on the back of 2020’s acquisition of Newport Beach’s William Lyon Homes.
Irvine Pacific, the in-house homebuilding arm of Irvine Co., was No. 3 with 318 sales, up more than 20% year-over-year.
While home sales on The Irvine Ranch were down slightly last year, Irvine Co. has been using Irvine Pacific for more of the housing projects it continues to sell at.
Likewise, No. 6 California Pacific Homes, which also only builds on The Irvine Ranch, saw a 50% boost in sales last year. CalPac is run by Cary Bren, the son of Irvine Co. chairman Donald Bren.
Homebuilders were able to hike up pricing last year as a result of burgeoning demand.
Irvine-based New Home Co. (NYSE: NWHM), No. 12 on the list, opened its Sterling neighborhood at Rancho Mission Viejo last year with prices starting around $850,000.
Average prices there are now closer to $1.1 million as a result of strong buyer interest, according to Southern California President AJ Jarvis.
“The buying power is really significant right now,” Jarvis said.
Officials with Trumark Homes in Newport Beach said they have also enjoyed higher-than-expected pricing at its Orange County portfolio, which includes an 82-unit housing project along Central Avenue in Brea that’s about 50% sold.
Trumark, the locally based homebuilding unit of Danville-based real estate firm Trumark Cos., last year said Daiwa House USA would take a 60% stake in the company, which sold 137 homes in Orange County last year, good for the No. 10 spot.
The new investment from Daiwa, an affiliate of Japan-based Daiwa House Industry Co., has set up Trumark for future growth, with expectations to sell nearly 300 units next year and 500 the year after that.
“The deal revamped our capital structure and made us much more aggressive on the land buying side,” said Richard Douglass, Trumark’s Southern California division president. It recently closed on one land deal locally, paying $6.5 million for 12.6 acres of land in Mission Viejo with plans to build 91 homes.
Irvine-based Stream Realty Partners brokered the deal on behalf of the seller, Saddleback Valley Community Church, which traded the land for about $516,000 per acre or $71,429 per home site. The site is on the corner of El Toro Road and Marguerite Parkway next to an office building owned by the church.
Trumark has noticed even stronger buyer demand in 2021, selling an average of two to three homes per week in Brea.
“It’s been on fire,” Douglass said.
Prices are expected to continue to rise in 2021, with John Burns Real Estate Consulting projecting a nearly 10% jump in new home prices nationally.
New Home Co. Executive Chairman Larry Webb believes pricing will continue to increase locally, though deliveries will be threatened by a lack of land supply.
“Demand is very strong and pricing is likely to continue to increase, but there isn’t enough land in place to see a big jump in deliveries,” Webb said.
“The good news in that is there won’t be a problem with overbuilding.”