Home Building Reverses 5-Year Slide in Region

The workmen spread across 17 acres in Woodland Hills cut a tableau of movement. Kneeling in dirt, their arms pumping like pistons, they hammer together wood molds so new home foundations can be poured. Nearby, an earth mover carves out a street from mounds of weeds and a water truck sprays behind to keep down the dust.

All of this activity is the handiwork of Kaufman & Broad, the state’s biggest new home builder. Going up are three- to six-bedroom homes, some with four-car garages, on one-third-plus acre lots--big by Los Angeles standards--and priced about $350,000 and up. There will be 36 homes in this new gated community, and the company expects every one to be sold within a year.

But more than a new residential tract, the development signals a rebirth of the new home market in the San Fernando and Santa Clarita valley areas after a five-year slide into oblivion.

In Valencia, the master-planned community developed by the Newhall Land & Farming Co., 425 new homes sold last year--the best showing since 1989--and in the first quarter of this year, new home sales were up another 40%.

Newhall Land, which sells land to developers or goes into joint development deals with them, is a barometer of the area’s roller coaster housing market. In 1989 Newhall Land recorded 799 home sales; by 1991 sales were down to 134, and they crept up slowly until last year’s spurt.

Given the shortage of open land on the floor of the San Fernando Valley, most of the new home developments taking root now are around the perimeter, such as in Calabasas, Agoura and the Valencia area. Kaufman & Broad, however, is nearing the sale of the last homes in the 181-home development in West Hills that it began building a couple of years ago.

One developer eager to get the first of its planned 74 houses on the market in Valencia is Los Angeles-based Greystone Homes Inc., which also has properties in Simi Valley, Thousand Oaks, Oxnard and the Santa Clarita Valley’s Stevenson Ranch.

“From the first of the year traffic and sales have picked up across the board. It indicates people are feeling more comfortable about the economy and that they won’t lose their jobs, and maybe the corporate downsizing has stopped or at least subsided,” said Charles Dragicevich, a Greystone executive. “People feel now is the time to buy before interest rates go up.”

The tough times have been good times, however, for bottom fishers like James Rasmussen, president of West Pointe Homes in Calabasas. He had the cash to buy up undeveloped land in Encino, Agoura and Thousand Oaks, sites that were either in or about to go into foreclosure, and he’s filling in those spaces with new homes. And they are selling.

Last year Rasmussen sold 13 homes, this year he’s confident he can move 50.

In Agoura he’s building 20 homes, with three and four bedrooms on a private cul-de-sac, starting at $450,000. He’s got commitments from buyers on 19 of the 20 homes already, “and the last 10 [sites] only have slabs up and nine of them are sold. That tells you how good the market is,” he says.

The appeal of Agoura, Rasmussen says, is to families trying to get away from crime in the Valley, plus the lure of the well-regarded Las Virgenes public school district.

And in an odd way, memories of the Northridge quake are a subtle sales tool helping them move their product, Rasmussen says. That’s because some customers don’t want to buy an older home figuring that by purchasing a new home, they won’t get stuck with any hidden quake defects.

There are also much stricter building codes in force now in the city and county. Rasmussen says his one-story homes now have 17 steel columns--required as reinforcements against quakes--while the same model “a year and a half ago would not have any.”

These improvements haven’t come cheap. Rasmussen calculates that they have boosted the cost of his homes by about $8,000 each, but there are buyers lining up anyway.

Bill Rheinschild, president of RWR Development in Van Nuys, has been waiting years for this uptick.

His firm slid from $80 million a year in sales at its peak in 1989 to just $13 million last year, and along the way he laid off most of his 100 workers. Now with the new home market coming back, Rheinschild hopes to hit $24 million in sales this year.

Rheinschild’s crew and his subcontractors are again busy putting up luxury homes on a hillside in Granada Hills, where about three dozen of the planned 88 homes in his Greyhawk Ranch project are finally sold.

His project, cut below the Santa Susana Mountains, contains spacious four- and five-bedroom homes. Rheinschild began carving up the land there in 1988. Then, beginning in 1991, everything froze in time for two years as his savings and loan association was seized by the federal government and his funding dried up.

“My focus was to save my reputation,” he recalls, as he scrambled to find new lenders. “For 24 months it was touch and go.” Now, he has two new lenders and the hammers have started moving again. “We survived the recession,” he says proudly.

Rheinschild has only a few more homes in Granada Hills to sell from his current batch, priced from $395,000 to $600,000, and because demand is picking up he thinks he can stop giving away extra incentives to draw buyers, like landscaping and improved flooring. When the next batch of homes goes up, he plans to bump up prices 5% to 10%, and he thinks the market is strong for those new prices to stick.

His Greyhawk development has the look of unfinished business. The model homes are fully furnished with plush carpeting and 20-foot-high entryways. In the kitchen sits a basket of plastic lettuce and carrots, and on top of the stove is a teapot. Piped-in music creates a homey mood.

But across the street is a graded but undeveloped lot with weeds sprouting and sandbags stacked along the dirt to divert the flow of rain.

Rheinschild is also about to break ground on a big home project in Simi Valley, and he has smaller development plans going on in Chatsworth and Thousand Oaks.

One measure that the home market has turned the corner, he says, is that raw land prices are up 30% to 40% since last year.

During the recession, there was a squeeze on funding for acquisition and land development deals, so now there are few ready-to-build lots left for sale in the city.

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HEAD New Home Sales

One of the biggest local residential development sites is Valencia. Homes sales have plunged there for most of this decade, but 1995 marked the best year for new home sales since 1989, and in this year’s first quarter, sales were up another 40%.

Year / New home sales in Valencia

1989: 799

1990: 317

1991: 134

1992: 141

1993: 204

1994: 272

1995: 425

1996*: 137

*First quarter, versus 98 in the first quarter of 1995)

Source: Newhall Land & Farming Co.