For Home Developers, Momentum Is Building : The industry is emerging from recession, buoyed by cheap land and consumer confidence. But prices are still under pressure.

In the late ‘80s, when the market for new homes around the San Fernando Valley was at its best, whole subdivisions cropped up in a flash and people camped overnight for first dibs. Today, developers build new homes by the handful instead of by the hundred, and count themselves successful if they get a trickle of people to tour them each day.

Still, for those who survived the housing slump this decade--in which home prices have sunk to 1988 levels--there are reasons to rejoice. In Ventura County, the Santa Clarita Valley and even in the San Fernando Valley, new homes are selling. Raw land is relatively cheap, and some banks are easing back into real-estate development again. Lending for new, mostly residential construction was $497 million in the third quarter this year for Los Angeles and Ventura counties, up from $179 million in the same period last year, said Dataquick Information Systems in La Jolla.

Although scores of local home developers have gone under, those small developers who remain in business have found that just surviving puts them in an elite class. “In this market if people are still standing with money in their pockets, you have to say they did something right,” said Ken Edwards, executive vice president of the commercial real estate services group at Bank of America in Los Angeles.

While recent years have been tough for small California home developers, several large, publicly traded home builders have moved in to take advantage of cheap land.

Consider Kaufman & Broad Home Corp. in Los Angeles, the state’s largest home builder. While many developers lost their properties because banks and S&Ls; would no longer finance them, the $1.2-billion-a-year company gobbled up foreclosed land from banks or owners under duress.

Thanks largely to this practice, Kaufman & Broad’s share of the new-homes market in the San Fernando and Santa Clarita valleys has risen to 30% from about 5% in the mid-80s, said Mark Beisswanger, president of the company’s coastal valley division. “We took advantage . . . to buy properties of high quality for an appropriate price,” Beisswanger said.

Good deals on land have made it possible for Kaufman & Broad to offer homes at the low prices the market now demands--something other developers, who bought land at the market peak, can’t afford to do.

At California Stratford, a 181-lot Kaufman & Broad development on rocky slopes in West Hills, four- and five-bedroom houses starting at about $300,000 have sold briskly since April. The company started selling a group of 16 homes on a recent Saturday morning--and had sold six by the end of the day. The houses have sweeping views of the Valley and are built with central staircases and open spaces instead of hallways. Rows of the compact homes rise from the dirt, and dozens of graded lots await construction.

So far Kaufman & Broad has built 84 homes here and sold 64 of them. The company is also selling homes at developments in Burbank, Simi Valley and Ventura County and will begin to sell homes in a development in Sylmar later this year. Those homes will be priced below $200,000. “When the proper value is provided, home buyers buy,” Beisswanger said.

Another larger builder, Toll Brothers, based in Huntingdon Valley, Pa., has launched a California division in recent months and plans a development in the Calabasas area, although they have not closed on a property yet.

And Del Webb Homes Inc., a Phoenix-based developer of retirement communities, has been working on a 95-home project in Valencia and is looking for new properties in the Santa Clarita and Ventura County markets. Del Webb began to focus on California around 1990, drawn largely by the abundance of cheap land here, said George Meeker, president of the Costa Mesa office.

For smaller home developers, though, the recent recession was something to try to survive, not gain by. “We made it. We are out the other side,” said Bill Rheinschild, 37, owner of Van Nuys-based RWR Development Inc., a small company that has specialized in hillside properties in the San Fernando Valley area since 1983.

After he lost the backing of a savings and loan for a development in Granada Hills, Rheinschild escaped foreclosure three years ago by selling other properties and three aircraft from his collection of antique warplanes. Only after finding new investors was he able to start building upscale homes in Granada Hills, and he is looking for new properties for the first time in years.

When the recession hit, Rheinschild’s sales dipped from $80 million per year to less than $5 million in 1993, he said. Rheinschild did manage to complete construction and sell the homes on three other developments after the market began its slide. But the Granada Hills site, which he bought in 1988, almost came to a halt.

In 1991 financing for construction at the site, called Greyhawk, was cut short when Rheinschild’s lender, FarWest Savings & Loan Assn., was seized by banking regulators. Rheinschild had spent millions to install utilities and build model homes on the Granada Hills site but had no financing to start home construction. For a while, he said, “it was a little difficult to get up in the morning.”

Now, 15 of the first phase of 17 homes at Greyhawk have been sold since they were put on the market a year ago. Half sold in the last two months. Rheinschild has begun another phase of 10 houses.

The five-bedroom houses with enough yard space for horse stables sell for $390,000 and up--about $150,000 less than Rheinschild originally planned. “If I could build 30 houses before this time next year, I’d sell them,” he said, adding that he may make a small profit this year after three years of losses.

Buyers of homes at Greyhawk include lawyers and accountants--people who weathered the recession well and are prepared to take advantage of dipping prices. “We figured if the market went down more it wouldn’t be by much,” said Tamara Hawthorne, who recently stopped by her new Greyhawk house to inspect the limestone paving stones being laid in the entry and the brickwork upstairs. Hawthorne and her husband, Andrew, have two small daughters and needed a bigger home, she said.

For small developers like Rheinschild, finding financing is still the biggest problem. But he was lucky because a small Newport Beach lending company, Zephyr Capital Inc., stepped in to finance the completion of the homes in Granada Hills. Zephyr continues to lend in a market many banks won’t touch, partly by tapping individual investors in the Middle East.

“We see ourselves as filling a void,” said Zephyr Capital partner Robert Wilcox. But of the 10 investments Zephyr Capital has made so far, none are larger than $7 million, an amount that is just a fraction of typical real-estate development loans five years ago.

Although a few banks have resumed making loans, they are doing so tentatively. Whereas once small developers would borrow tens of millions and build 100 homes at a time, now they borrow $10 million or less for development and construction costs, and they must carry 25% or more of the cost themselves to qualify for a loan, said Sam Lyons, of Great Western Bank subsidiary Bryant Financial. Great Western “quietly came back” to the construction lending business last year, he said.

Another new home development is Woodside Homes in Winnetka, with houses priced at no more than $194,000. They are closely packed together with very small back yards and a shared neighborhood swimming pool--almost a townhouse arrangement, except that the homes are detached. These smaller homes are geared toward first-time buyers. “The magic cutoff point is $200,000,” said Paul Walker, director of sales and marketing for Woodside.

Woodside is owned by Sunnyglen Corp. in Newport Beach, a 25-year-old firm that has built large subdivisions, including several in Palos Verdes and San Pedro. Walker said Sunnyglen has been holding the Winnetka property for more than 20 years, so it can still afford to sell the homes at low prices. Since April the first phase of 21 homes in Winnetka is almost sold out, and Walker said the sales office is busy with lookers. But even at these starter-home prices, Walker finds five or six would-be buyers for every one who actually qualifies for financing.

For small developers who have survived, the credit crunch remains pressing because the inventory of cheap land from foreclosures is running out, so land prices are creeping up. Housing values, though, keep falling. That means developers like Rheinschild must buy land soon or lose their chance because the few banks now lending for construction won’t consider new projects unless they offer a healthy profit margin.

This narrowing gap between land and home prices threatens to squeeze out even more small developers and hand an even greater advantage to bigger companies, said Rheinschild, adding: “Nothing comes easy in this business.”