High-End Housing Heats Up : New Affluence Spurs Southland Luxury Home Sales

Fueled by stock market profits and growing executive ranks, construction in the luxury home market is beginning to take off again throughout Southern California.

Well-heeled managers who had put off purchasing a larger home during the recent housing slump are now pouring some of that newly minted wealth into flashy digs with amenities like wine and cigar rooms, libraries and home theater rooms.

“Consumers have said we want larger and more,” said Rudy Svrcek, senior vice president of marketing for the Irvine Co.

Builders started getting the signal that high-end buyers were ready to spend last year when sales of new homes over $500,000 shot up 47% throughout Southern California, with Los Angeles experiencing a 54% gain and Orange County a 27% hike.

Sales continued to accelerate this year in certain pockets throughout the region, from the San Fernando Valley to posh enclaves in San Diego County.

“The baby boomer market is at the peak of its purchasing power,” said Richard E. Pope, president of Taylor Woodrow Homes California Ltd. in Laguna Hills. “We are satisfying pent-up demand.”

During California’s recession, few builders were putting up houses of 3,000 and 4,000 square feet and instead were concentrating on affordable homes while interest rates were low.

Three years ago, the average sale price of a home by Pope’s company was about $300,000. Today, thanks to larger homes with ritzier features like his-and-her vanities and pre-wired home offices, its average price tag is over $500,000.

Sales of its palatial homes in developments like Castaways in Newport Beach, where prices run from $680,000 to $1.3 million, have been so brisk that the company plans to open four more luxury communities this year.

Analysts say expensive, move-up homes are going quickly because buyers think that the Southern California real estate market has hit bottom.

In fact, prices have crept up as much as 10% at some Southern California communities, including Harbor Cove in Newport Beach. The builder, Standard Pacific Corp., raised prices after the homes sold faster than expected.

Although some buyers stand to lose money on the home they are selling because of a soft resale market, Jeff Meyers of the Meyers Group thinks buyers would rather purchase more expensive homes while they believe prices are low.

“They are willing to take a hit to move up,” he said.

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Experts say that new homes with modern styling are luring many buyers away from older resale homes.

George Bravante and his wife, Nancy, who recently moved to Newport Beach from Napa Valley, looked at more established communities before putting a down payment on a $1.1-million house in the Signature Collection in Newport Coast.

But the houses they checked out in places like Nellie Gail Ranch in Laguna Niguel looked dated, with older design features like conversation pits. It would have cost too much time and money to remodel, George Bravante said.

“A home there costs $900,000 and it doesn’t have the ceiling heights or styling that we want,” Bravante said.

Builders prefer constructing more expensive houses because of higher profit margins, both on the house and on its luxury options like granite counter tops, stainless steel Viking ranges and Sub-Zero refrigerators, said Meyers

And, when more expensive houses sell, there are generally fewer financing problems. Most upper-end buyers easily qualify for financing and, in fact, some don’t even need a loan.

On the other hand, construction of these homes can be risky. Builders must tie up a lot of the company’s cash, and the houses often don’t sell as quickly as starter homes.

But for now, the market is humming.

As of last year’s fourth quarter, 47 projects in Los Angeles County and 20 in Orange County were selling above the $500,000 mark. And a number of new communities will be opening soon in Newport Beach, Huntington Beach, Palos Verdes and Westchester, as well as in Coto de Caza and Irvine.

“There is a lot of new product coming into the market and it’s bigger houses on bigger lots,” said Les Whittlesey, of Whittlesey-Doyle land brokerage in Irvine.

In fact, many builders have revised plans for upcoming communities, boosting the size of the homes, the number of standard features and the price. That was the case with Capital Pacific Holdings’ million-dollar community Mulholland Park, in Tarzana.

“We tended toward a little bigger product there than the day we purchased it,” said Dale Dowers, CPH chief executive.

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Some buyers are so eager to get their hands on a certain home that they will camp out. Eight families gathered overnight a couple of weeks ago to buy homes at Turnberry in the Seacliff area of Huntington Beach, strictly on the faith of the blueprints.

Bill Blum, 53, and his business partner Jeff Benson, 40, who operate golf club maker Smartsport Distribution Inc., decided to stop by the development on a whim to see how the community was progressing. When they saw the beginnings of a sales line forming at the trailers, they decided to take the plunge.

“I called [his wife] on the cell phone and said I’m camping out. I won’t be home tonight,” Blum said. They had just finished hanging the curtains in a new home in Mission Viejo, purchased a year earlier.

With his new golf business starting to take off, Blum was confident he could afford the new home. He said he didn’t want to pass up the chance to live on a golf course that was close to his office in Huntington Beach. So he agreed to pay $717,000, more than double the price of his Mission Viejo home, for one of the estate homes in Turnberry.

Benson also bought a home, about a block away.

“We figure the values of these homes will just accelerate,” Blum said.

Buyers are once again paying huge sums to get golf course views, ocean views or larger lots. In some Newport Beach subdivisions, a lot with an ocean view goes for $500,000--as much as the price of the house, Meyers said.

Meyers believes that the market is fueled by baby boomers who are looking down the road to retirement. That’s why security gates and “passive” sports like golf have become such important draws.

“Buyers are willing to pay a premium because they recognize that this is the house they will be in for a long time.” he said.

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Make Mine a Mansion

Sales of new homes priced at $500,000 or more increased last year throughout Southern California, indicating high-end home buyers are spending again. This year’s total through March 10 was 47% ahead of the 1996 pace. Sales of new homes, $500,000 and more:

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Orange Los Angeles Southern County County California 1991 179 214 512 1992 262 273 736 1993 140 143 360 1994 281 194 608 1995 199 184 472 1996 253 283 695

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Through March 10: *--*

Orange Los Angeles Southern County County California 1996 32 42 8 1997 47 44 126

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Sources: Acxiom/DataQuick Information Systems; Researched by JANICE L. JONES/Los Angeles Times

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How They’re Moving

Weekly sales at new luxury home developments picked up in 1996, but trail rates of 1988 and 1989. New developments priced at $500,000 and more and average weekly sales rate (fourth quarter):

Orange County:

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Developments Sales 1988 16 1.89 1989 33 1.71 1990 37 0.39 1991 38 0.38 1992 28 0.25 1993 27 0.35 1994 21 0.50 1995 20 0.46 1996 20 0.77

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Los Angeles County:

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Developments Sales 1988 9 1.44 1989 55 1.26 1990 85 0.43 1991 71 0.37 1992 59 0.34 1993 47 0.28 1994 41 0.31 1995 44 0.29 1996 47 0.44

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Sources: The Meyers Group; Researched by JANICE L. JONES / Los Angeles Times