Advertisement

16th ANNUAL SURVEY OF RESIDENTIAL BUILDING : Home Builders Fete Best Year, Foresee Healthy ’87

Share via
Times Real Estate Editor

Sales volume of new housing construction throughout Southern California hit an all-time high in 1986, and the area’s home builders foresee another boom year.

Results of the 16th annual Times Survey of Residential Building in Southern California, measured by an index of median sales and projected sales volume, place the 1986 mark at 260.9 for sales and 213.3 for anticipated production during 1987, new records for the index created in 1971 with 100 as the base figure. Attractively low mortgage interest rates, assurances that first- and second-home interest payments would be tax deductible and a robust move-up buyer market spurred sales throughout the Southland, encouraging principals of more than 150 firms to predict a 29% increase in sales this year. Coincidentally, the U. S. Commerce Department last week indicated a strong continuance of sales activity nationwide.

Traditional sales volume leaders in the annual survey--Watt Industries of Santa Monica and the William Lyon Co. of Newport Beach--were topped this time by CoastFed Properties of Beverly Hills, apartment construction specialists, claiming $328 million in total sales volume last year with construction of 3,286 apartment units, 103 single-family homes and 33 condominiums.

Advertisement

CoastFed ranked second in the 1985 survey with $271.6 million in sales. Its apartment construction represented 96% of its output while single-family homes represented 3% and condominiums, 1%.

(See Building Leaders and Alphabetical Listing columns on this page.)

In the most popular housing category, the single-family home, the third-ranked Lyon firm reported construction of 2,127 dwellings as representing 53% of its total output last year. Although Fleetwood Enterprises of Riverside--ranked 57th--reported construction of 2,295 homes, they were all manufactured housing units, but it indicated the growing strength in that market segment.

Lyon had the largest numerical gain, with 2,307 more units built in 1986 than in 1985, for a total of 4,072 units in all construction last year.

Advertisement

Second-ranked Watt Industries was the leader in condominium construction, reporting 564 such units, 29.5% of its total activity for last year. It built 1,214 single-family homes, accounting for 63.5%, and 135 apartment units, 7.1%.

Lyon built 1,657 apartment units, representing 41.3% and 288 condominiums, 5.7%.

The 1986 survey attracted the largest-ever participation in both number of respondents to the voluntary survey and in the ranking list.

Builders throughout Los Angeles, Orange, San Diego, Riverside, San Bernardino, Ventura and Kern counties participated voluntarily in the annual house counting. Three Santa Barbara-based companies also participated but submitted data on their construction only in the seven-county survey area.

Advertisement

Of 173 survey forms returned (up from 154 last year), 164 reported sales for 1986, compared with 144 in 1985.

Sales totaled $7,424,500,000 (rounded figures) among the 164 firms, also ranking as the highest dollar amount in the history of the survey. A year ago, the figure was $5,523,700,000 for 144 participating firms.

(The latter figure reflects the revised total in the 15th annual survey, necessitated by a correction made in data originally submitted by the Lincoln Property Co. of Huntington Beach. Incorrect data had dropped the firm from 14th place in 1984 to 143rd place in 1985--next to last. Sheepish company officials said six zeroes had been omitted in the survey form. In the current survey, the company ranks fourth.)

Of the 164 firms reporting sales for last year, 158 offered projections for their sales activity this year, forecasting a 29% increase in sales, which would top the $9 billion mark.

Of the 158 building firms reporting sales and projections, 85.3% (138 companies) predict an increase, up slightly from 84.9% of 118 companies expecting increases in last year’s survey.

The Ed Krenz Corp. of South Pasadena, ranking 163rd--next to last--foresees itself gaining in sales this year by a huge 937.5%, moving from its 1986 sum of $800,000 to $8.3 million. The third-place Lyon Co. predicts the largest dollar increase, $124.6 million, from $305.5 million last year to $430.1 million this year.

Advertisement

The 68,629 housing units built last year by the survey participants was an increase of 31.8% from the previous count and showed 20 additional firms reporting building activity.

Single-family units totaled 32,033 in 1986, or 46.7% of all housing constructed, an increase of 42.6% over 1985. A total of 125 firms (76.2%) built single-family housing, up from the 98, or 70.5% from the previous survey.

Apartment units totaled 27,442 or 40% of all activity, an increase from the previous figure of 34.9%. Sixty-two developers (37.8%) reported constructing apartment properties, compared with 51 firms or 36.7% in 1985.

In condominium construction, there were 9,154 units, or 13.3% of all units built, compared with the 1985 figure of 22.5%. A total of 73 firms (44.5%) built condominiums last year but during the last two years, the percentage of such builders has been slipping significantly, from 65.9% (85 firms) in 1984 and 60.4% (84 companies) in l985.

Of 161 firms projecting construction for this year, 133 or 82.6% plan some activity in single-family housing, with 49, or 36.8%, of them planning to build only single-family dwellings.

In the apartment field, 74 firms, or 46%, will build some apartments and 16, or 21.6%, plan to build apartments exclusively.

Advertisement

In the condominium category, 69 firms, or 42.8%, anticipate building such units, while only five, or 7.2%, of those companies will build them exclusively.

Planning to build in all three housing classifications are 24 firms, or 14.9%.

Completed and unsold inventory at the end of the accounting periods of the respective companies totaled 5,129 units, a drop of 974 units from the last survey’s 6,103 units, while 60 firms (36.6%) had no inventory to report. The previous survey showed 46 firms, or 3l.9%, with no inventory.

Lincoln Property Co./Fore Division, ranked 29th, whose activity is all in apartment construction, reported the largest number of unsold units, 1,016, but explained that it builds for investment rather than resale. Valencia Co., ranked 26th, was second, with 517 unsold residential units.

The index of median sales volume and projected sales volume for participating firms shows an increase over last year of 32.6% for sales and 8.8% for projections.

The projected sales for this year of $213.3 million, using 100 as the base for 1972, shows an expected continuation of the upward trend of the past few years, up considerably from 96.1 in 1983. But the wary 8.8% increase anticipated by the survey respondents indicates some caution for the immediate future.

Of the 164 current participants, 98 took part in the 15th annual survey. The 98 firms’ 1986 sales amounted to $5,706,300,000, up 24.5% from the previous year’s $4,582,800,000. Sales increased for 73 firms and declined for 25; 70 had reported increases in the previous tally.

Advertisement

Ninety-five of the 98 firms had made projections for 1986, and 38 exceeded or met them in sales. Calmark Development Corp. of Los Angeles, ranked 22nd, showed the largest jump in percentage (163.4%) over its projected goal, with actual sales of $84.3 million.

Among the 98 firms, 53,289 housing units were built, an increase of 28.2% over the previous year’s 41,560. Seventy of the firms, or 71.4%, built more units last year than in 1985.

Twenty-one firms, or 12.8%, of all participating respondents, said they planned to build units this year equipped with active solar-energy systems, with 17 expecting to build 4,789 such units. Of that number, 38.5% would be in single-family houses, 45.5% in apartments and 15.9% in condominiums. IDM Corp. of Long Beach, ranked 44th, expects to build 1,000 solar-equipped units, all in apartments.

A total of 3,227 manufactured housing units were built last year by nine firms which represented 5.5% of all survey participants. In 1985, five firms built 2,050 such units. Over the past two years, increases have amounted to 57.4% over 1985 and a big 357.4% over 1984. This year, five companies plan to build 892 units.

Only one builder, the Lyon Co., mentioned mobile-home construction in the survey. It reported building 1,317 units in 1986 and a projection of 1,690 units this year. Lyon was also one of the nine firms in the manufactured housing business.

As usual, there were a number of companies which missed the Feb. 13 deadline for returning survey forms. One, Saddleback Homes of Santa Ana, with $10.5 million in sales, would have ranked about 114th.

Advertisement

As an adjunct to the survey, Lee Stephens of Stephens & Associates, San Diego-based executive search and consultant firm, said “Southern California builders are among the nation’s highest paid executives.”

“For example, the chief executive of a housing company in Southern California can earn $400,000, $500,000, $600,000 and even $1 million annually. Compensation in the housing industry isn’t like compensation in any other industry. There are many variables that affect how much a person can make, in addition to the traditional and anticipated impact of size on compensation.”

The chief executive officer of a firm with a sales volume of up to $50 million might get an average annual cash compensation of $233,000, he suggested, while a company with $200 million and more might bring $328,000 in cash compensation.

Among Southern California firms, base salaries of $200,000 and a $100,000 cash bonus for chief executive officers would not be uncommon, ranging downward to a project construction superintendent of $45,000 in salary and $5,000 cash bonus, Stephens said.

Index of Median Sales Volume and Projected Sales Volume in Southern California for Firms Participating in The Times’ 1972-1987 Residential Building Surveys

Sales Volume Sales Projections (1971-100.0) (1972-100.0) 1971 100.0 1972 100.0 1972 104.3 1973 97.7 1973 97.8 1974 89.8 1974 85.9 1975 78.1 1975 76.1 1976 81.3 1976 105.4 1977 142.2 1977 141.3 1978 156.3 1978 144.6 1979 151.6 1979 144.0 1980 125.0 1980 142.4 1981 125.0 1981 91.3 1982 78.1 1982 80.4 1983 96.1 1983 83.7 1984 140.6 1984 128.3 1985 157.0 1985* 196.7 1986* 196.1 1986 260.9 1987 213.3

Advertisement

* Revised

Advertisement