Demand for Lavish Houses May Be Cooling : Official Says County Builders May Turn to Smaller Units to Keep Busy

For the last year or so, local builders have been putting up increasingly large and lavish houses, and demand has been so great that nearly every one has been snatched up immediately.

Now there are signs that the insatiable demand for big houses may be cooling slightly, and local builders may have to start building smaller, less expensive homes in order to stay at work.

That was the word from Dale Stuard, president of the National Assn. of Home Builders, who spoke to 52 influential builders, lenders and public officials in Newport Beach on Wednesday.

Stuard, an El Toro home builder, will relinquish the presidency of the powerful trade association--after the customary year in office--in January.

In southern Orange County, where Stuard builds single-family homes, the average price of a new house hit a record $329,214 in the third quarter, and prices for houses being resold are among the highest in the nation.

One reason: Builders are chasing affluent purchasers--typically people who already own a home and who are now a majority of the people looking for a new home--by building larger and more lavish homes for them.

But in the Northeast, where demand for luxury housing is already slacking off, builders are now constructing more affordable homes to appeal to a broader market, Stuard said.

“As the Northeast is cooling off, the only market is less expensive housing for first-time home buyers,” he told the group. “We’re going to have to get back to them too as the market cools off here.”

The hordes of people looking for houses earlier this year have now diminished, Stuard said.

“There’s a slowdown from the time when 40 people showed up” for every house a builder put on sale, he said.

The market still remains strong but it is too early to tell whether it will resume the furious pace it maintained for most of this year, he said.

“When we will start to be concerned (if the market doesn’t pick up again) is about the third week in January, when the Super Bowl is over” and the market begins to speed up from its annual fall slump, Stuard said.

Whether home builders will follow his advice is also up in the air.

Building the bigger houses is attractive to builders, Stuard said in a subsequent interview, because a builder must construct only one house to make the same profit he would on two or three smaller houses.

Stuard spoke at the annual Business Roundtable sponsored by Irvine home builder Barratt American Inc.