20th Residential Survey : Builders Mixed on ’91 : Sales: While some feel this year could be tougher than last, others see signs that the market is coming back.

More than 150 Southland home builders, coming off one of the worst years for new housing in the state since the 1982 recession, say that 1991 could be even tougher than last year.

Of the 151 developers who responded to the 20th annual Times survey of residential construction, 144 provided sales data for 1990 and projections for ’91.

Those 144 builders expect to sell a total of $8.4 billion worth of new homes in the Southland this year, down 7.4% from last year.

The 144 developers say they’ll build 44,319 homes in Southern California this year, a 9.9% decline from the 49,174 they built in 1990.

And only 54% say they expect to sell more homes in ’91 than they did last year, compared to the 73% who predicted a sales increase in 1990.

“An awful lot of buyers are still worried about the recession, the effects of the war and the future of home prices,” summed up Mark L. Frazier, president of Barratt American Inc. in Costa Mesa.

However, the news isn’t all bad.

In follow-up interviews to the survey, which was conducted in January, Frazier and many other builders said that they’ve seen an increase in the foot traffic moving through their model homes over the last several weeks--a sign, they hope, that the worst of the housing slump is over.

“I think people are feeling a lot better than they were 60 or 90 days ago,” said Bruce Karatz, chairman of Kaufman & Broad Home Corp.

“The war has gone well, mortgage rates are the lowest they’ve been in years, and it’s starting to look like the recession might not be as bad as a lot of people originally thought.”

Added William Lyon, president and chief executive of the giant home building company that bears his name: “We’ve seen a real surge in traffic over the past few weeks. It looks like the market is coming back.”

The voluntary survey asked builders about their activity in eight counties: Los Angeles, Orange, San Diego, Riverside, San Bernardino, Kern, Ventura and Santa Barbara.

The William Lyon Co. was named the Southland’s No. 1 builder, based on its 1990 sales volume of $624.4 million. It was the fourth year in a row that the Newport Beach-based company’s revenue topped those of other survey respondents.

Lyon completed 2,969 homes in Southern California last year and expects to build another 2,923 in 1991. The company is active in two dozen Southland communities, with projects ranging from $100,000 condos in south Orange County to $300,000 detached homes in the Trabuco Highlands.

Santa Monica-based Watt Industries Inc. was named the No. 2 builder for the fifth year in a row. It completed 2,033 homes in the Southland last year and its sales volume totaled $470.3 million.

Watt plans to build another 1,245 units in 20 Southland communities in 1991, from $60,000 condos in Apple Valley to $600,000 single-family homes in the San Fernando Valley.

The Fieldstone Co. of Newport Beach was No. 3, two notches above its spot in last year’s survey. The 1,354 homes it completed last year generated $357.4 million in sales, and the company plans to build another 1,200 units in ’91.

Woodcrest Development, headquartered in Irvine, was ranked No. 4. It recorded $312 million in sales last year and expects to log another $242 million in revenue in 1991.

As in the past several surveys, developers complained about the fees they must pay to local governments to build roads, schools and other items before they’re given approval to start a new housing tract.

And as in past surveys, they also complained about neighborhood groups and slow-growth advocates who cause costly delays.

But those longtime gripes took a back seat this year to builders’ concerns about the sagging economy and buyers’ hesitancy to purchase new homes.

The survey asked builders to rate seven factors that were impacting their business on a scale of one to five, with one meaning “did not affect me at all” and five meaning “affected me a great deal.”

The “soft economy” was named the biggest culprit in last year’s sales slowdown, and “buyer hesitancy” was a close second.

Builders said that the two are closely linked: It’s hard to say whether Southlanders got skittish about buying a home because the economy is soft, or whether the economy is soft because consumers are keeping their wallets firmly in their pockets.

Affordability problems caused by high land prices and other factors was the builders’ third-biggest headache, followed by the fees they must pay to build a new tract.

Although some developers have complained that the crackdown on the savings and loan industry has made it tougher to get construction loans, difficulties of lining up financing for new tracts came in a surprisingly low fifth on the list of builders’ problems.

And in a sharp turnaround from previous surveys, problems caused by growth restrictions and environmental constraints ranked dead last on this year’s list of builders’ concerns.

Even though many builders said they’ve noticed an increase in the number of people visiting their new tracts over the last month or so, developers admit that they’re having a hard time turning “looky-loos” into buyers.

“We had one couple come to our tract three times in a single day to measure rooms and go over the place with a fine-tooth comb, but they still didn’t buy a home,” said Eric Friedman of Friedman Development, a small home builder headquartered in Whittier.

“There’s a real problem with consumer confidence right now. Our homes are reasonably priced and everybody loves them, but they just won’t sign up for one.”

Many builders said they’re offering a variety of incentives--from upgraded carpeting to free cruises--in order to spur sales.

Some of the incentives are even more offbeat.

Friedman, for example, may soon begin offering free “job-insurance” policies to anyone who’ll buy a house in his 15-unit new-home development in Duarte. If the buyer loses his job, the policy will kick in to make the homeowner’s mortgage payments for up to a year.

Kaufman & Broad is offering discount-rate loans--8 1/2% fixed-rate mortgages, about a point below the rate being charged by lenders--at most of its new tracts. It’s a costly proposition that shaves millions of dollars off the company’s profits.

Even the Southland’s biggest builder is offering incentives to keep sales flowing.

“If you buy a home in some of our developments, we’ll guarantee to buy it back from you for the same price anytime within the next two years,” William Lyon said.

“We’ve got confidence in the future of Southern California’s housing market, and we’re willing to put our money where our mouth is.”

But in a sign that builders are cautious about ‘91, only three of the survey’s Top 10 builders expect to build more homes this year than they did in 1990--and all three companies serve specialized markets.

No. 5 Kaufman & Broad said it expects to build 1,700 Southland homes this year, up from 1,543 in 1990. The company caters primarily to the first-time-buyers market, which has remained strong while pricier homes have gone unsold.

No. 6 Casden Properties expects to build 1,583 units this year, up from 1,422 units in 1990. However, all of Casden’s work in ’91 will involve rental apartments--a business that has gotten a boost because sky-high home prices have forced many people to rent.

And No. 8 Goldrich & Kest Industries, which plans to nearly double its production to 1,188 units, will split most of its work between apartments and attached homes. Sales of condos and townhouses have been relatively strong because thousands of buyers have been priced out of the single-family market.

Of course, the accuracy of those projections won’t be determined until the end of this year, when builders once again tally up their sales figures. But clearly, the severity of last year’s downturn caught many developers by surprise.

In last year’s survey, more than three-quarters of all the builders predicted that they would record higher revenues in 1990 than they did in ’89. Only 11% exceeded their sales goals; 89% came up short.

Many builders who cater to the upscale market--generally, new homes worth $350,000 or more--blamed much of last year’s sales slowdown on the sluggish resale market.

“You can’t buy a $750,000 house if you can’t sell the one that you already own,” said Dennis Moloney, president of Legare Homes in Redondo Beach.

Most builders said they’re downsizing their plans for ’91 and going about their business more cautiously than in the past.

Cal-Coast Properties, which has two Palos Verdes developments where prices range from about $700,000 to $1.85 million, won’t even begin pouring cement until it has a buyer “signed up and ready to go,” said its president, Ed Miller.

“This is no time to gamble,” Miller said. “We can’t afford to sink a lot of money into a house and then have it stand vacant for six months.”

Although few builders complained about growth restrictions, some offered “horror stories” about clashes with slow-growth advocates.

Officials at McMillan Communities complained that they had obtained permission from San Diego authorities two years ago to build a mixed-use development in Scripps Ranch, on the northeast rim of the county. The pact called for the company to pay $81 million for new roads, schools and other facilities.

Although it had widespread community support, McMillan said that a group of five activists started a petition to scale down the size of the project. The city eventually rescinded its approval and only recently gave its blessings to build a much smaller development.

“The delays cost us more than $10 million in carrying costs because we were paying interest on land that we couldn’t develop,” said Steve McGill, McMillan’s executive vice president.

The survey didn’t ask builders what they thought of the media’s coverage of the housing slump, but many took the time to complain about it anyway.

“Media, including your newspaper, totally made the real economic situation worse by printing negative stories in such great numbers that the public reacted accordingly,” complained William A. Fruehling, president of California Community Builders in Santa Monica.

“On any given day, I counted five to six lead stories describing the situations which would lead to ‘economic collapse’ in the U.S.”

Although California is in its fifth year of a drought, only two builders mentioned any concern that the water shortage might discourage future construction.

“We already install flow-constrictors and other water-saving devices in our homes, and we use drought-tolerant plants in our landscaping,” said McGill at McMillan Communities. “But I’m a little worried that slow-growthers might use the drought as a new weapon against development.

“There’s a certain simplistic beauty in saying, ‘If we don’t have enough water now, why should we let these builders keep building more homes?’ ”