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The Condo’s Comeback

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TIMES STAFF WRITER

As Orange County enters one of its busiest seasons for new home construction, several county and city officials are noticing something remarkable: the return of the condominium.

Housing researchers estimate that several hundred more condo units are being built this year compared to the same period in 1998. Although the number comprises a tiny portion of new home construction, it comes after years of very little condo construction due to the economic downturn of the early 1990s and a barrage of lawsuits over defects.

“They were pretty much dried up,” said Larry Nees, manager for the county’s planning and development department. “Now we’re seeing them again.”

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Urban planners are enthusiastically welcoming the new condos, saying they provide a crucial “entry” market for people who want to live in a community where they cannot afford a house. With the median rent in Orange County now topping $1,000, officials say having a healthy supply of condos is more important than ever.

Construction for attached condominiums reached a low of 13 projects in the county at the end of last year, according to San Diego-based Residential Trends. Now there are 17 projects under construction, according to the latest figures available, and more permits are being issued. Each project averages 125 to 200 units.

This is the first increase in new condominium construction in years, said Don Moe, the Irvine Co.’s senior vice president for residential sales and marketing.

“If [developers] see a profit opportunity, they’ll figure a way into it,” Moe said.

In San Clemente, for example, condominiums are going up for the first time this decade, with two projects in the works, said Helen Del Grosso, customer specialist for the city’s planning department. There are four such projects in Irvine, the most in years, city building officials said. In Ladera Ranch, the county’s newest subdivision, 200 of the 960 homes in the first phase of the development are condominiums, planner Steve Kellenberg said.

Sou Mehryazdan, a 47-year-old sales specialist, thought about buying her first house last year, yet she also wanted to stay in Irvine near friends and relatives. After weighing her options, she decided to live in a smaller home and be near her loved ones.

Her condo doesn’t have a big backyard, but she can plant rose bushes around the edge of the patio, she said. And while her living room is somewhat small, she’s able to entertain more often because her friends don’t have to drive as far to visit.

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“I had a choice between a house in Aliso Viejo or a condo in Irvine. I chose the condo,” Mehryazdan said. “The price was right and the place was definitely right.”

Condominiums were extremely popular in the 1980s as a stepping stone for renters looking to become owners. At one point condos comprised 50% of the market, Moe said. In general, they were less expensive than a traditional single-family home and more of an investment than a rental.

As land costs soared and building defects emerged, litigation exploded. Thousands of suits were filed in the last decade statewide over alleged construction flaws. Condos are especially susceptible to such litigation, because one development has multiple owners, each of whom can take builders to court.

Earlier this year, for example, homeowners from a 243-unit condominium in Aliso Viejo agreed to a $4.1-million settlement against Shappell Industries and its construction crew.

To protect themselves, developers stepped up efforts to document their work, such as taking photos or hiring independent inspectors, Moe said. Construction techniques also improved, luring buyers back into the market.

Paul Kranhold, spokesman for the Irvine Co, said the resurgence is due to two factors. “No. 1 is a strong economy. . . . No. 2 is that builders have gotten a little smarter about how they document the construction of condominiums, so that they can fight construction defect lawsuits, which have by far been the largest deterrent in the last 10 years.”

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Russ Valone, president of Residential Trends, said although the economy has created a market for condos, liability issues will continue to drive builders away.

“We’re starting to see a little bit of a reversal, and you’re seeing more stuff coming up,” Valone said. “You will probably see modest increases, but it’s going to be a long, long time before we get back to where we were.”

Steven Smith, a project manager for West Gate Development, said for the first time in years, his company is simultaneously involved in several condominium projects, including one in Cerritos that targets first-time buyers and another in San Clemente aimed at the well-heeled.

Set near Linda Lane Park on a bluff overlooking the ocean, the 23-unit project in San Clemente will allow residents to watch the sun set from their living room or walk down a winding staircase to the sand.

“If this was 1992, we would be looking at this project very differently,” Smith said. “But right now, there’s no doubt that this is a valid enterprise. . . . We’ve gotten a fair amount of people to put their names on a reservation list.”

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