The Price Is Righter for Eager Home Buyers : Real estate: Costs at new housing developments coming on the market in Orange County are reflecting lower land prices and economies in design. Sales are fast-paced.
Right now it’s just a piece of ground marked by a few wooden stakes and a trench for the foundation, but this patch of dirt is a thing of beauty to Renee Wood.
The Lakewood woman and her husband just bought it four weeks ago--Lot 1 at Newcrest Estates on the high plateau here just north of the developing community of Rancho Santa Margarita.
They camped out for 10 days and agreed to pay $260,900 to purchase the 5,000-square-foot lot and the house that will be built there over the next few months--a 2,735-square-foot neoclassic home that will provide plenty of space for the growing Wood family.
If the price doesn’t surprise you, look again. That price works out to $95.40 per square foot. That’s 40% below the 1989 average Orange County new home cost of $160 per square foot.
Even in a recession that’s a pretty good deal.
“That’s finally making sense,” Wood said. “They’re starting to build homes that appeal to real people.”
Wood, 36, is a substitute teacher who has stopped working to raise two daughters, ages 9 months and 16 months. Her husband, Don, also 36, is a lineman for Southern California Edison Co.
Three years ago, a report about a couple buying a 2,700-square-foot home in Orange County invariably would have described at least one of them as a lawyer, doctor or high-ranking business executive. Both would have held full-time jobs and they probably still would have worried about their ability to make the monthly payments.
These Newcrest homes aren’t cheap--most Orange County residents can’t afford a $270,000 house--but they are relatively good bargains. The median price of a detached new home in Orange County during the first quarter of the year was more than $10,000 higher, at $282,160, according to TRW Redi Property Data in Riverside.
But such homes--built on land bought at substantial discount and designed with fewer frills for lower cost--are starting to appear in several area developments and brisk sales this year suggest a bright spot in Orange County’s otherwise gloomy housing market.
In a recent study for his board of directors, Coto de Caza marketing chief Tom Martin compiled sales data for the 12 new home developments that have opened over the past six months in inland south Orange County--south of Irvine and east of the San Diego Freeway.
Even in light of Coto’s own fast-selling development by J.M. Peters Co., what Martin found surprised him: “They are averaging 3.25 sales a week. That was considered a good pace back in the boom.” And it is far superior to the countywide average of just 0.6 sales a month at each development during the fourth quarter of 1992--the latest period for which such figures are available.
Pricing on the latest of the county’s new homes is a big selling point--the median for the nine single-family detached tracts in Martin’s study area is $252,400, or $40,590 below the 1992 median sale price for new detached homes in Orange County. His survey included three attached projects.
The J.M. Peters homes at Coto de Caza are priced from $325,000 to $365,000--an average of $110 a square foot--and company president Dale Dowers says that project and two others--one with prices down around $88 per square foot--are the least expensive Peters homes anyone will ever see. “It just won’t happen again because we’ll never get land that cheaply.”
The prices have helped Newport Beach-based Peters, once known as Orange County’s priciest luxury tract home builder, rack up almost three sales a week at each of the three inland South County projects.
But the brisk pace of homes sales isn’t limited to the inland areas, marketing specialists say.
Bonnie Benton, a Laguna Niguel marketing consultant, said similar sales are occurring in other communities, such as Aliso Viejo where a number of developments have opened in the past six months with prices at or below $200,000--for single-family detached homes.
Earlier this month, for instance, Pacific Gateway Homes of Santa Ana Heights opened the first phase of its Pacific Grove development in Aliso Viejo and sold 16 homes in an hour. Prices for the 1,242- to 1,819-square-foot homes--built with financing from CalPERS, the California Public Employees Retirement System, ranged from $173,900 to $202,900.
“Builders that can get financing,” Benton said, “are taking advantage of downsizing and of less expensive land.”
While price is a big part of the equation, low interest rates and the appeal of something new on the market also is drawing buyers.
And these are new homes: designed from the start to be competitive in a recession. For the most part, builders and their architects say, the changes are internal--use of prefabricated roof trusses and chimneys, for example, or a switch from clay to concrete tile or even to composition shingles.
But the new designs also feature less elaborate elevations and window treatments than in the opulent days of the building boom, when people got into fist fights over a place in lines to buy $500,000 homes on postage-stamp lots in Tustin Ranch.
“Buyers don’t want the frills these days,” Dowers said. “The basic quality is there--we don’t skimp on things like ceramic tile showers and counters--but we’ve taken out the third fireplace and the wet bars and it all adds up to some real savings.”
Builders like Kaufman & Broad Homes’ South Coast Division in Newport Beach and J.M. Peters Co. also are offering lowered prices on efficiently designed new houses on less-expensive land.
“I heard someone call them boxy,” said Renee Wood, commenting on one of her family’s home-shopping trips to Orange County. “But I don’t think they are. I noticed that there are fewer rounded or arched windows in the newer houses, and fewer rounded walls, but I think the quality is there. When I heard boxy I thought, ‘Hey buddy, I like it.’ ”
The houses have a certain attractiveness because they are not homes in the third or fourth phase of a development that first went on sale in 1989 or 1990 that have gone through three or four price cuts and several emergency redesigns to help the builder trim construction costs.
Wood said she and her husband toured 27 developments from Yorba Linda to Aliso Viejo before settling on the unbuilt Newcrest tract because of the location, the design and the price--in that order.
“There is a phenomenon occurring. Projects that have come on the market under a new configuration have consistently taken market share away from those that have been on the market a long time,” said John Shumway, president of Market Profiles, a Newport Beach real estate consulting and data analysis company.
“There is nothing wrong with the homes that have been on the market for a while, but ‘newness’ is proving to attract buyers more readily.”
Marketing consultant Charles Dryer, president of Dryer & Young Inc. in Newport Beach, agreed that the newest developments are selling better, but suggests that design has little to do with their success.
“Everything I know of that is selling well is on land that the builder purchased from a bank or a previous developer at a greatly reduced price,” Dryer said. “And they are able to lower the price of their homes to reflect that and they are killing the builders who are stuck with land that was bought in a more expensive market.”
Newcrest president Tom O’Donnell’s explanation for his project’s relatively low prices and hot sales pace--11 units in the first three weeks, despite having no models for buyers to look at--supports Dryer’s contention.
“It’s not that we designed the homes differently,” he said, “we just got the land at a really good price from the William Lyon Co.”
He wouldn’t disclose the price, but other builders familiar with land sales in the county suggested that Newcrest paid about 50% less than Lyon did when it bought the land at the top of the market in 1989.
One constant that Martin noted as he reviewed the developments in his study is that prices of the houses--and of houses in other parts of the county--have not dropped much since last winter.
“I think one thing this shows is that we’re reaching some sort of equilibrium, where price and affordability meet and mesh,” he said. “One thing for sure, each of these new projects that has opened has sold like crazy.”
Priced to Sell: Attracting New Home Buyers
Square footage prices for new home developments in inland south Orange County are well below the 1990 county average of $152 per square foot. Among the projects opened in the area within the last year are several priced below $100 per square foot.
DETACHED HOMES
Project/ Base House Weekly builder/ Lot size price size Cost per average of location (sq.ft.) range (sq.ft.) sq.ft. homes sold Fairway Estates 6,000 $325,000- 2,850 $114.03 3.4 J.M. Peters Co. 365,000 3,400 107.35 Coto de Caza Villavante 3,200 180,000- 1,600 112.50 * 3.0 Western National (9 units 199,000 1,962 101.42 Rancho per acre) Sta. Margarita Paragon 6,000 295,000- 2,825 104.42 2.75 J.M. Peters Co. 327,500 3,290 99.54 Rancho Sta. Margarita Buena Vista 4,500 217,990- 1,847 118.22 2.75 Fieldstone Co. 234,990 2,156 108.99 Rancho Sta. Margarita Crestmont 6,000 254,000- 2,918 87.04 * 2.5 J.M. Peters Co. 301,000 3,400 88.52 Portola Hills Newcrest Estates 5,000 243,900- 2,421 100.74 5.0 Newcrest Dvlp. 260,900 2,735 95.39 Trabuco Canyon California Ridge 5,000 189,900- 1,283 148.42 * 2.9 Kaufman & Broad 210,700 1,700 123.94 Trabuco Canyon Vintage Promenade 3,600 180,000- 1,477 121.86 2.4 Kaufman & Broad 200,000 1,896 105.48 Foothill Ranch Warmington Homes 7,200 326,900- 2,600 113.00 1.7 Warmington 372,900 3,300 125.73 San Juan Capistrano
Project/ builder/ Date location opened Fairway Estates 2-11-93 J.M. Peters Co. Coto de Caza Villavante 3-20-93 Western National Rancho Sta. Margarita Paragon 4-3-93 J.M. Peters Co. Rancho Sta. Margarita Buena Vista 4-3-93 Fieldstone Co. Rancho Sta. Margarita Crestmont 2-13-93 J.M. Peters Co. Portola Hills Newcrest Estates 4-17-93 Newcrest Dvlp. Trabuco Canyon California Ridge 3-6-93 Kaufman & Broad Trabuco Canyon Vintage Promenade 8-17-92 Kaufman & Broad Foothill Ranch Warmington Homes 8-22-92 Warmington San Juan Capistrano
ATTACHED HOMES
Project/ Base House Weekly builder/ Lot size price size Cost per average of location (sq.ft.) range (sq.ft.) sq.ft. homes sold California Court 17 per 109,990- 813 116.15 2.5 Kaufman & Broad acre 142,990 1,231 135.28 Mission Viejo California Terrace 14 per 136,990- 995 137.67 3.2 Kaufman & Broad acre 163,990 1,378 119.00 Mission Viejo The Vineyard 18 per 124,900- 924 121.85 * 7.0 Laing Homes acre 163,900 1,345 135.17 Foothill Ranch
Project/ builder/ Date location opened California Court 12-12-92 Kaufman & Broad Mission Viejo California Terrace 12-12-92 Kaufman & Broad Mission Viejo The Vineyard 4-28-93 Laing Homes Foothill Ranch
* Transactions in which buyers made a deposit to reserve first rights to buy a home
Source: Individual builders
