Developer Emile Haddad averaged three hours of sleep a night this past week. Here’s why:
The first 726 of 9,500 new homes he plans to build just went on sale this weekend near Orange County’s Great Park.
“I started looking at this deal almost 13 years ago,” said Haddad, president and CEO of FivePoint Communities in Irvine. “For me, it’s interesting to have this moment.”
It’s a big moment for Orange County, too. The FivePoint’s megadevelopment is part of a massive surge of new-home construction countywide. After more than five years of sluggish sales, massive layoffs and bankruptcy filings, the homebuilding business has climbed back to levels not seen since the housing boom ended.
In the past year, builders have launched more than 50 new-home projects, big and small, from Brea to San Juan Capistrano, from Rancho Santa Margarita to Huntington Beach, according to MarketPointe Realty Advisors of San Diego. Buyers are snapping up homes as soon as they hit the market.
“That’s just a reflection of the pent-up demand that’s out there, and it’s occurring for a few reasons,” said Irvine housing consultant Mark Boud. “First and foremost is, the economy is growing and has been growing for sometime now. That lends confidence to the market.”
Some of the most conspicuous signs of a homebuilding rebound include:
• Orange County developers launched 29 projects with almost 2,200 units in the spring alone. A year earlier, they launched just eight new projects with 522 units.
• Single-family building permits jumped 80 percent this year so far, climbing to nearly 2,600 permits through August, according to the Construction Industry Research Board. That’s up from 1,400 single-family permits in the first eight months of 2012 – and from 845 houses during the first eight months of 2009.
• Buyers purchased just fewer than 1,900 houses, townhomes and condos during the first eight months of the year. That’s a 72 percent jump from the same period last year, according to DataQuick.
“There are still not enough new units to meet demand,” said Tim Kane, president of Irvine-based MBK Homes, which drew more than 200 people to a grand opening of its 33 Sea House townhomes in Costa Mesa last weekend.
The major project launches in the past year include Rancho Mission Viejo’s 941-home Sendero grand opening on June 28 near San Juan Capistrano. The long-delayed development is the first of five phases with 14,000 homes planned on the final 6,000 acres of ranchland being turned into homes and businesses. Featuring parks and community centers, Sendero includes a gated, 286-home enclave for seniors, plus an additional 286 apartments.
The Irvine Co. has opened up a dozen projects since September 2012 with nearly 1,700 housing units in the north Irvine developments of Portola Springs, Stonegate, Woodbury and Cypress Village.
Lennar began sales of an additional 233 townhomes in its Central Park West development in Irvine, and Shea Homes and Standard Pacific Homes jointly marketed an additional 237 houses in the Blackstone development in Brea.
Builders report overwhelming responses. Rancho Mission Viejo officials say 9,000 people turned out to view their Sendero models on its opening weekend. Builders there already have 230 homes – a fourth of Sendero’s total – under contract after just 13 weeks of sales.
Standard Pacific Homes reported that 5,000 home shoppers turned out in March for the grand opening of the Montserrat and Coral Ridge projects in Brea. That same month, a dozen families camped for a week outside the sales office of the Brightwater project overlooking the Bolsa Chica wetlands, waiting for a chance to place orders on the next phase of new homes. Starting prices for that development’s cheapest project – Capri – jumped from $800,000 in March to $1.4 million now.
The Irvine Co. said it sold 1,094 homes this year through Sept. 12 – up 19 percent. Homebuilding marketing vice president Tom Veal described the current market as “phenomenal.”
At Pavilion Park’s grand opening this weekend, FivePoint created a temporary parking lot to accommodate more than 700 vehicles and hired a fleet of golf carts and a trolley to ferry an expected 5,000 to 10,000 home shoppers around. The company hired 50 people to help direct traffic, answer questions and keep the site clean and is serving mountains of pretzels, cookies and miniature pies.
“There (aren’t) enough homes to meet the demand, for sure,” said Haddad, the FivePoint CEO. “Orange County has an imbalance of housing to jobs and population growth.”
Buyers include aging baby boomers and younger millennials, move-up buyers and foreign investors, developers say. They include boomerang buyers recovering from a foreclosure or short sale and would-be Inland Empire residents seizing on post-slump price drops to shorten their commutes to jobs in Orange County.
Home shoppers Dessi Sarabosing and her mother, Eva Mitreva, slipped into Pavilion Park during a VIP and media preview day on Thursday, saying they were too curious to wait for Saturday’s grand opening. They were interested in the development’s multigeneration homes, which include separate living quarters for relatives.
“It’s lovely,” Sarabosing, 35, said of Lennar’s Roundtree project at the south end of the development. “It’s better than the Irvine Co. (homes). The lots are larger, and having a variety of builders provides a variety of options.”
in the game
The new-home market remains a relatively small, but growing part of the overall housing market in a county of nearly 3.1 million residents.
In 1988, one in five Orange County homes sold was new. This year, new homes make up about one 1 of every 14 sales.
“It’s a small part (of the market),” said Orange broker Al Ricci, president of the Pacific West Association of Realtors. “But it has to have some impact.”
Homebuilding also remains well below pre-slump levels.
Orange County averaged 4,900 single-family building permits from 2000 to 2007, construction-industry figures show. Housing consultant Boud predicted that builders would pull 3,900 single-family home permits this year.
“So we’re coming back,” Boud said, “but we’re below the long-term average.”
Still, homebuilding levels this year are triple what they were during the economic downtown.
“People have been on the sidelines for a long time as they waited out this economy,” said Dan Kelly, Rancho Mission Viejo’s senior vice president for government relations and corporate communications. “And supply was dwindling.”
The public’s appetite for new homes has pushed prices up about 28 percent from a year ago. That increase – coupled with rising mortgage rates and a rising inventory of homes for sale – might start to cool some homebuyers’ ardor for new housing.
Boud projects that home-price appreciation rates will drop from a projected 18.4 percent this year to 11.6 percent in 2014 and 6 percent in 2015.
“There was a mad scramble to get in the market” before price go even higher,” MBK’s Kane said. Now, he said, “that’s not the case.”
Next spring, “we’ll see more stability in the market,” he added. “It will be easier for buyers to buy homes.”