New-home sales in Orange County took a step back last year as two of the region’s three largest master-planned developments brought no new offerings on line until late in the year.
The county’s 28 largest homebuilders sold 3,701 new single-family homes, condominiums and townhomes here, down 8% from 2014, based on this week’s Business Journal list.
It’s the first year-over-year decline in new-home sales here in four years.
The list includes builders that posted at least 20 new-home sales during the year. 2014’s list included 30 builders that topped that mark and combined for 4,032 sales, the strongest volume in a decade.
Single-family home sales fell about 6.3% to 2,512, and condo and townhouse sales dropped nearly 12.6%, to 1,189 sales.
Last year’s drop-off appears to be a product of limited supply rather than waning buyer interest; existing home sales in OC increased about 13% last year, according to California Regional Multiple Listing Service data.
Of OC’s three largest sources of new-home development—Irvine Ranch, Great Park Neighborhoods and Rancho Mission Viejo—only Irvine Company’s land had major projects open for sale during a bulk of the year.
The numerous neighborhoods on the Irvine Ranch where homebuilding took place—including Orchard Hills, Cypress Village, Portola Springs and Stonegate—had a combined 1,674 sales last year, according to Irvine-based John Burns Real Estate Consulting.
Irvine Ranch was California’s best-selling master-planned community last year and the second best-selling community in the US.
• Irvine Pacific LP, the in-house homebuilding arm of Irvine Co., retained the top spot on the list with 629 sales on the Ranch, a 7.5% decline.
• Walnut-based Shea Homes and Horsham, Pa.-based Toll Brothers Inc., which are co-developing the Baker Ranch project in Lake Forest, among other local projects, are No. 2 and 3, with 376 and 354 sales, respectively.
• Rounding out the top five were Irvine-based TRI Pointe Group Inc., with 291 sales, and Irvine-based Standard Pacific Corp., with 283 sales.
Standard Pacific completed its merger with Westlake Village-based Ryland Homes in September, forming a new company called CalAtlantic Group Inc. that’s now among the five largest builders in the U.S. The combined company is based in Irvine.
• Standard Pacific and Ryland, which is No. 10, continue to sell homes under their original names and in some cases have separate offerings on sale at area developments, such as in Great Park Neighborhoods.
We’ve listed the two builders’ sales separately; had they been combined, CalAtlantic would have taken the No. 2 spot with 420 sales here last year.
Data for the list was provided by the Costa Mesa office of Washington, D.C.-based real estate research firm Hanley Wood LLC, augmented by information from individual builders and Business Journal research.
More on Tap
Next year’s list shouldn’t be affected by a shortage of new-home sites. If anything, builders appear concerned that there might be too many offerings on tap in OC.
Esencia, the second phase of development at Tony Moiso’s Rancho Mission Viejo, kicked off sales in October. The 890-acre project will total about 2,400 homes and apartments when completed; the developer reported 200 sales as of last week.
Likewise, the 960-home second phase of development at Great Park Neighborhoods, Beacon Park, opened for sales in August and now has 10 builders selling.
Other large projects coming to market this month include:
• Eastwood Village, a 1,900-home development on Irvine Ranch near the intersection of Jeffery Road and Irvine Boulevard;
• The second phase of the 1,800-home Baker Ranch development in Lake Forest. The Shea Homes-Toll Brothers project has already sold more than 500 homes in its initial phase, which opened in 2014;
• Five more neighborhoods at Irvine Co.’s Portola Springs community in North Irvine featuring homes by New Home Co., Brookfield Residential, William Lyon Homes and California Pacific Homes.
Also on tap for the next couple of years are a 1,180-home Irvine Co. development in East Orange and an 840-home Great Park Neighborhoods development headed up by Lennar Corp. and Toll Brothers.
• The level of development could affect some builders’ land values and potential land appreciation, according to Sheryl Palmer, chief executive of Taylor Morrison Inc.
The Scottsdale, Az.-builder ranked No. 7 on the list with 179 sales. It opened the high-end Sea Summit community in the Marblehead development in San Clemente last year and has been one of the area’s most active land buyers over the past couple of years.
“When I look at the number of choices the consumer has (in Southern California), in places like Orange County and San Diego, (community counts) are up about 50% over the last 24 months,” Palmer said during the company’s last earnings call.
“So I think with the buyer having more choices, you won’t see the levels of appreciation that you’ve seen,” Palmer said. “But I don’t think that’s all bad for us.”
• New Home Co. chief executive Larry Webb said that betting on rising land values isn’t the best investment strategy for area builders and developers.
“We don’t put appreciation in our land deals, and I don’t think any builder should,” said Webb, whose company ranks No. 11 on the list with 130 local sales.
New Home Co. sold out one of last year’s priciest new developments, a 39-home project called Fiano in the Pacific Ridge community in the hills of Newport Coast. It has an additional two high-end projects teed up for sales later this year at a nearby development at Crystal Cove.
• A bevy of higher-priced developments in OC could begin to have an effect on the local market, said one area builder.
“I think the market overall, there have been a lot of new-home community openings … in coastal Southern California over the course of the last few months, both within master-planned communities, as well as just from our infill-oriented communities,” said Matthew Zaist, co-chief executive of William Lyon Homes, which is No. 12 on the list with 98 sales.
That’s having an effect on the sales pace for some of the Newport Beach-based builder’s higher-priced communities in those markets including OC, but it’s not causing the builder to cut prices, Zaist told analysts during the company’s latest earnings call.
These “are markets (where) you can’t replace those real estate assets,” Zaist said, “so we are fine selling at a slower sales pace and (will) hold the margin on those projects.”
