Home Builders Predict Rosy 1986 Prospects : Most Surveyed Believe That Successful 1985 Housing Market Will Carry Over to This Year
Even in the best of times, home builders always are capable of reining in their optimism, so when one Southland builder says that he looks forward to 1986 with “controlled optimism,” he is running true to form.
James W. Oates, partner in the Whitehawk Partnership, added in the space for comments in the 15th annual Los Angeles Times Survey of Residential Building in Southern California that he believes that the overall for-sale housing market “will stay strong with attractive interest rates fueling both entry-level builder housing and the resale market to keep the move-up market intact.”
The success of his firm’s Whitehawk at North Ranch project in Westlake Village depends on this resale strength, “so we are putting our money where our mouth is regarding the continued health of the market.”
Getting More Selective
On the apartment side of the partnership’s business, Oates said that Whitehawk is being increasingly selective “due to the jump in construction activity. Since we hold our buildings for long-term investment, we feel that any temporary swings in the market will not affect us tremendously. We try to maintain geographic diversification, as well as a product mix, to avoid any severe impact of localized overbuilding.”
Since Whitehawk retains ownership of its projects, proposed tax changes are of less importance than they would be to syndicators or resellers of buildings, Oates said. Restraining his optimism, Oates summed up the prospects for a “healthy 1986 through a balance of rental and for-sale housing in a range of moderate to exclusive markets.”
Raymond J. Rutter, president of Cayman Development Co., was much less restrained, undoubtedly because 1985 was the best year in his firm’s history, with an increase of 697% in sales over 1984.
Rutter expects 1986 to be even better, projecting delivered sales of about $50 million, compared with more than $45 million last year.
New Hosuing Concept
He attributes this projected increase to Seacliff On The Greens, a development of low-density attached housing, a new concept he believes will result in another record year for Cayman.
Roger C. Hobbs, president of Century American Corp., is a man of few words, albeit well-chosen ones: “Century American will continue to be an innovative builder that concentrates on providing high-quality homes, value and good locations.”
Rick Doremus, president of EPAC Financial Inc., was anything but enthusiastic about last year, which he called a “steady, but unexciting, year.” He added that “hard work and self-discipline” got his firm through 1985. With lower interest rates and strong buyer demand, 1986 promises to be an improvement over last year, he said, with recovery from “disinflation, mortgage buy-downs and a help to profit margins. EPAC’s development focus will include more commercial and apartment construction in 1986.”
Sanford A. Katz, president of S.A. Katz Construction Co. Inc., looked back at a very good 1985, and looks forward to an equally successful 1986. He is optimistic about an upcoming tract in Woodland Hills “as interest rates seem to be holding at a level, reasonable rate.”
Apartment Overbuilding
Katz is concerned about overbuilding in the apartment sector: “I only hope that the public will be able to afford the rent that may be required to service the debt.”
Still, he added, “1985 was a very good year for apartments due to the low to moderate (income housing) program by the city of Los Angeles; we are running at a vacancy factor of less than 1% on our present rental units.”
Randall W. Lewis, director of marketing for Lewis Homes, agrees that 1986 will be as good as 1985 and possibly even better, thanks to diversification into more non-residential projects. He sees diversification as a growing trend in the next few years.
Lewis cautions against taking the predictions of demographers too literally, especially since demographics is hardly the exact science some have portrayed it.
Recommends Caution
“I think our industry must be cautious in dealing with the so-called graying of America market segment since it is very complex. I hope we don’t have many bad projects as a result of inexperienced developers rushing in with the wrong product.”
There will be continued searching by builders for infill sites, such as the Lusk Co.’s project next to the Inglewood Forum, Lewis said.
“For every buyer willing to drive to cities such as Sunnymead or Palmdale, there are probably 10 who would be willing to accept infill sites if they were available,” he said.
