$1-Million Tract Home Arrives in Southland

The $1-million tract home is here.

Throughout the Southland, from the desert to the sea, from Tarzana to San Diego, home builders are producing houses in subdivisions or tracts-- a term developers hate--for buyers willing to spend nearly $1 million or more.

At least a dozen builders are developing megabuck houses in nearly as many Southern California locations, an informal survey shows. They range from golf course homes in Rancho Mirage to mini-mansions overlooking a horse ranch in north San Diego County.

The houses aren’t enormous (the biggest is about 5,000 square feet), but most have spectacular views and such features as steam showers, spas, catering kitchens with two dishwashers and double ovens, central vacuum systems, security systems with TV monitors and options such as marble instead of tile or carpet on the floors.

As Orange County developer Garth Chambers put it: “Floor plans in the $1-million range are offered with enough options so customers feel there is customizing and they are getting their money’s worth.”

But the homes also have this in common: They are what the building industry calls “production houses,” what most people think of as “tract homes.”

Production housing is defined as having several models and option packages but no buyer at the time of ground breaking, according to Ann Guss of the Building Industry Assn. of Southern California.

The dictionary defines tract as “a housing development,” but developers equate tract housing with Levittown, a cheaply constructed Long Island community built shortly after World War II.

Said Jerry Sellers, vice president of marketing for S&S; Construction: “Tract homes mean little cookie-cutter boxes in a row. We don’t build those.”

“Most $1-million homes are built as custom homes without any risk to the builders,” said Guss of the BIA. “Most production builders are building houses for under $300,000.”

But “the $1-million production houses are becoming more and more common,” said Ben Bartolotto, director of the Construction Industry Research Board.

S&S; Construction is developing 86 of them on a hilltop in Rancho Palos Verdes, using six floor plans--up to 5,000 square feet in size--and 24 elevations. Opening prices were $795,000 to $1.3 million.

Chambers, developer of a new 874-acre golf course community known as Dove Canyon in Orange County, is selling 26 lots to a group of builders planning houses that will sell at $800,000 and up, with 10 of those homes to close escrow by Jan. 1.

“I’ve produced an environment suitable for the $1-million range,” Chambers said. “It has fairway frontage, because to get the $1-million range in prices, a development must either have fairway frontage or an ocean view.”

Or a country-club atmosphere, said Ken Wilson, whose Haseko-Wilson partnership is developing 40 $1.5-million houses and 11 $1-million townhouses in Brentwood at the master-planned MountainGate, where there are 14 tennis courts and 27 holes of golf.

Two other developers, Jama Enterprises and Mountain View Homes, are also producing $1-million-plus housing at MountainGate.

Thirty detached homes are being built by Mountain View, with 12 in the first phase being completed at prices from $1,475,000 to $1.6 million. And 17 houses will be built by Jama on a site where grading is just being finished. Prices of those homes haven’t been set yet, but they are expected to be from $1.5 million up.

Life Style Purchased

A fourth builder at MountainGate, Jay Steinbeck, was unavailable for comment, and it could not be learned if his homes are production or custom, but Wilson said Steinbeck just completed 15 houses priced from $1.2 million to $1.5 million, with 11 sold.

Another country-club environment where $1-million production homes are being built is Morningside in Rancho Mirage. Developed by Ed Johnsen’s Trojan Properties and The Equitable, the project’s final 42 houses--out of 410--are expected to be priced from slightly above $1 million to $1.9 million.

Wilson says it is a life style that is being purchased with a $1-million home in these communities, but he doesn’t underestimate the importance of a good site:

“Location is everything. If I were building these in Pacoima, I’d be worried. If I were building these in the flats of Beverly Hills, I wouldn’t even come to work.”

The $1-million production house would be a sure winner there, he explained, “because the real estate values are so high, but the flats have been built out for decades.”

There are some possible sites for such housing in what is known as the Beverly Hills Post Office area, he added.

Another prime location is Bel-Air, and there is a development of 135 production homes planned there, on a site across Sepulveda Boulevard from MountainGate. Prices for the 38 units in the first phase are $700,000 to $1.4 million. The project is being developed by Prestige Homes, a subsidiary of Goldrich & Kest.

Project in Tarzana

Harlan Lee & Associates is planning to develop 178 houses in Tarzana, all with $1-million-plus price tags when sales open in the fall.

That project is also in a prime location, said Michael Dieden of Harlan Lee, “but the challenge will be to create a neighborhood that doesn’t look like a tract, where you drive around and there is a sameness about it. Houses can’t resemble each other, so we’ll use several different architects.”

At Coto de Caza, a 6,400-home master-planned community in Orange County, there will be five floor plans for The Arbors, a development of 28 homes expected to range from $600,000 to more than $1 million. InterAmerican Builders plans to start construction this summer.

Moe Tidemanis, vice president of development for Coto de Caza, said production homes in the $1-million range are “rare for Coto.” The Arbors is being built on what he termed “a special site” on a hill.

Farther south, Eugene Klein, who owned a chain of movie theaters before buying the San Diego Chargers and then training and racing such thoroughbreds as his “Winning Colors,” is developing Del Rayo Downs in Rancho Santa Fe, with 65 mini-mansions--houses that look grand but are 2,500 to 4,080 square feet in size.

With partner Guy Gardner, Klein started the project in 1987, at prices from $545,000. The 10 remaining are priced at just under $1 million.

No Designs Alike

They are on what Stephen C. Games, a real estate broker who has advised Klein on his projects’ marketability, terms “convenience lots, in a planned development.”

Nearby, on the 150 acres Klein is developing by his horse-training facility, he is also building Del Rayo Estates--eight houses averaging $6 million, but there are no models for these; no two designs will be alike.

A more typical production-house developer is Tom Vanic, with Urban West, who is planning 239 houses, averaging 5,000 square feet, in the West Hills area of the San Fernando Valley. First-phase homes will be for sale this summer at just under $1 million each.

The houses are being designed to appeal to buyers who want large, well-appointed homes but don’t want to build the houses themselves.

“We believe there is a strong market for this,” Vanic said, “and we foresee it getting stronger.”

If there is any question that there is a demand for $1-million production housing, consider this:

Sellers of S&S; Construction noted that there were “56 people waiting with checks to buy” the 16 houses in the S&S; Rancho Palos Verdes Estates project, “and one man came in with an attache case filled with $800,000 in cash.”

Demand for Larger Homes

And Bruce Froehlich of Prestige Homes said of his firm’s Bel-Air project:

“We opened sales last week, and 34 of the 38 houses in the first phase were reserved, so we will offer the 21 units in the second phase in a few weeks at the same prices.”

There is also a demand for ever-larger homes, Sellers said. “That’s why we’re building the larger--5,000-square-foot--model.” The larger house comes with a larger price: $1.5 million.

“Within the next couple of years, we could have four projects offering $1-million production homes,” he added. Besides Rancho Palos Verdes, the projects would be in Northridge, Laguna Niguel and Yorba Linda.

Two years ago, when Edward J. Miller’s Cal-Coast Development Group bought 85 acres, known as Wallace Ranch, to develop in Rancho Palos Verdes, near the S&S; project, he didn’t dream that he would build 155 houses at opening prices of $725,000 to $1.68 million. The first 20 will be available in the fall.

“When we bought the land, we thought the houses would go for $750,000 tops, but the market went up so dramatically,” he said.

‘Standard Appreciation’

Joel Singer, research director for the California Assn. of Realtors, said, “Houses have appreciated in the past two years 35% to 40% in many areas, so going from $700,000 to $1 million is standard appreciation in those areas.”

The market is fueled, he said, “by investment capital coming in from Japan and other Asian countries as well as Europe, where the value of the dollar is low.” Many of the buyers are also empty-nesters or people purchasing their fourth or fifth homes, say developers.

Continued escalation of housing prices has some negative aspects, as Singer pointed out:

“It’s a tragic comment on providing affordable housing, and it raises the question: Can California be competitive with other markets? We’re looking at housing prices at three or four times the cost in other parts of the country. Corporate executives could decide to locate elsewhere. It could have a negative effect on the California economy.”

Nonetheless, the $1-million tract house appears to be here to stay.

Said Chambers, the Dove Canyon developer:

“The $1-million production house was unheard of two years ago. Today, people are still approaching the idea with some skepticism, but two years from now, it will be accepted, because $500,000 is already commonplace for good production housing in Orange County.”

RANKING THE TOP 10 REAL ESTATE FIRMS

Top real estate brokerage firms doing business in California, based on number of national transactions in 1987, the latest year for which statistics are available.*

Number of Rank Company Transactions 1 Century 21 Real Estate Corp. 726,874 (Irvine) 2 RE/MAX International Inc. 384,167 (Englewood, Colo.) 3 Coldwell Banker Real Estate Group 360,000 (Chicago) 4 Merrill Lynch Realty 131,100 (Stamford, Conn.) 5 Realty World Corp 104,632 (Fairfax, Va.) 6 Grubb & Ellis Co. 29,822 (San Francisco) 7 Red Carpet Real Estate Services 25,600 (San Diego) 8 Fred Sands Realtors 10,572 (Los Angeles) 9 Fox & Carskadon/Better Homes 7,600 & Gardens (San Carlos) 10 TRI Realtors 4,400 (San Francisco)

* Includes sales and leases of both residential and commercial real estate. Source: Roulac Real Estate Consulting Group, San Francisco