Two Homebuilders Walk into a Bar…

We couldn’t think of anything either… But here’s an update on San Bernardino & North Central Riverside Counties:

San Bernardino & North Central Riverside Counties currently have 49 actively selling projects, up 67% from 2008, when there were only 16 actively selling projects. (Source: Hanleywood)

  • K. Hovnanian takes the lead with 6 actively selling projects
  • The majority of active homebuilders in this sub-market have two actively selling projects. 

Rental rates have increased 2.2% in the San Bernardino-Riverside-Ontario Metropolitan Statistical Area (MSA) since October 2010

Clarion purchased 3 multi-family properties for a combined price of $100 million and a total of 586 units.

  • The largest property was a 264-unit complex in Rancho Cucamonga called Village on the Green Apartments.  This complex sold for $43 million.
    1. The complex is surrounded by fairways of Empire Lakes Golf Course and is within close proximity to Victoria Gardens and Ontario Convention Center.
    2. Article link: http://www.rentv.com/content/homepage/mainnews/news/14883

Number of Inland Empire foreclosures DECREASE:  Foreclosure filings in San Bernardino fell nearly 17% from August to September 2011, while national foreclosure activity increased by less than 1 percent from Q2 2011 to Q3 2011.  (Source: San Bernardino Sun Staff Report)

Source: Doug Jorritsma, Senior Marketing Consultant, (949) 852-8288 x13, and Winn Galloway, Marketing Consultant, (949) 852-8288 x27

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‘Orange’ You Glad You’re in Orange County?

In Apartment News: AvalonBay Communities commences construction on Phase II of Jamboree Village; rental rates continue to increase in most cities in Orange County (http://lansner.ocregister.com/2011/10/19/apartment-rents-back-to-pre-recession-levels/135453/); construction of two apartment projects on Parcels 1A & 2A at Tustin Legacy is planned for 2013, once infrastructure is completed (http://lansner.ocregister.com/2011/09/28/construction-at-tustin-starts-in-13/125743/).

As of October 1, 2011, conforming loan limits (FHA mortgage limits) were lowered to $625,500 for single family residences, from $729,750 (http://online.wsj.com/article/BT-CO-20111021-700012.html).

City Spotlight:  San Juan Capistrano is considering a 32-unit residential development and equestrian facility on The Oaks horse ranch, as well as a continuing care retirement community at The Orchards, a former Crystal Cathedral property (http://sanjuancapistrano.patch.com/articles/retirement-community-tweaks-plans-eager-to-develop-rancho-capistrano).

Be on the lookout for a new Orange County listing in the next couple of weeks!

Source: Allison Rawlins, Marketing Consultant, (949) 852-8288 x26

Lights… Flashing… Several High Profile Sites Trade Hands in SD County

The San Diego residential land market continues to plod along.  Most offerings are receiving strong interest as the building and development community looks for future inventory.  The general consensus is that the key indicators show stronger markets in the near future and everyone is filling their near-term pipeline (2012-2015).  Land Advisors recently completed the marketing campaign for The Lakes, a 248-lot project in the Rancho Santa Fe area.  The offering received strong interest from around the Nation.

Other notes from around the region…

  1. Meritage Homes made its first entry into the San Diego market with a purchase of 92 semi-finished lots in Oceanside, CA.  The property known as Hi Hope Ranch has a controversial past including lawsuits with the adjoining neighbor, Vista Unified School District, and a bankruptcy.  The property has been on the market for over a year and had been under contract with several builders.  The purchase price was reported to be just over $10 million.
  2. Another high profile Oceanside property also closed escrow.  MG Properties purchased Ocean Village, a “broken” condominium project near the Oceanside City Hall.  According to reports, none of the 33 units in the project were sold and the new owners will be leasing them out as apartments until the market firms.  The purchase price was $11.75 million which should allow the new owners ample room for profits, according to sources familiar with the project.
  3. Proving that you never know where the buyer will come from, a high profile 18-acre infill site in Mission Valley known as West End was purchased at a foreclosure auction last week.  The Buyer, Plaza del Sol Real Estate Trust is believed to be a church group looking for a new campus.  The site had been planned for 490 multi-family units but the project was never approved or developed due to the weak market in 2007-2010.  It is currently occupied by Mission Valley Inn and Frogs Gym.
  4. HOUSING:  According to the experts, foreclosures and defaults were down in September.  Hopefully this signals the start of an orderly process of unwinding the remaining problem properties still in the system, and tempers the uncertainty of prospective buyers:  www.nctimes.com/blogsnew/business/realside/article_fd80ea2f-890c-56bb-8231-d5d4231b30fa.html
  5. Look for new multi-family listings from the San Diego office of Land Advisors Organization in the next few weeks.
  6. Redevelopment of an eyesore in Solana Beach is in the works after American Assets bought a former trailer park on Coast Highway.  The 1.76-acre site at 329 S. Coast Highway finally traded hands at 63% of the original listing price after being on the market for several months.  The Buyer plans to redevelop the site for commercial/residential use.

Source: David Landes, Senior Marketing Consultant, (858) 568-7428

How Do You Cut Red (Development) Tape? LA Tries Some New Scissors…

In an attempt to create a more efficient, transparent system for development services, the City of Los Angeles initiated a macro scale overhaul of its current development system in early 2011.  In recent weeks, the Development Reform Strategic Plan was passed.  The Plan is the result of more than six months of cooperation between several City departments, including Planning, Building Services, Public Works, the Mayor’s office, several outside consultants and local stakeholders. 

According the City, these reforms and strategic plan updates will make Los Angeles a better place.  Some of the changes will include the following:

  • Zoning Code Simplification and Comprehensive Zoning Code Reform. An overhaul of the City’s antiquated zoning code to simplify the rules and bring the code in line with the 21st century vision for Los Angeles.
  • Updated Community Plans. The updates of seven new Community Plans and building a framework for ongoing long range planning efforts, enhancing a culture of good planning that ensures our policies are consistent with our goals and priorities for our communities.
  • Resolution of Conflicting Conditions. The establishment of a system for resolving interdepartmental conflicts that arise during the entitlement and permitting processes. Customers will receive detailed project conditions up front, and will no longer face delays that result from conflicting requirements.
  • Development Services Case Management. The addition experienced staff from five key departments together in one office to provide comprehensive project navigation, facilitation, and problem-solving services.
  • Leading-Edge Technology. Investment in new technology that will provide the public with greater transparency and enhanced access to project information, provide City staff with tools to help them work efficiently, and create a less paper-intensive review process.

Last year the City approved more than $3.3 billion dollars in new construction, which created roughly 23,500 jobs.  With the new Development Reform Strategic Plan in place, the City aims to cut much of the red-tape that slows the development and improvement of Los Angeles and spur a revival that is needed to boost the local economy.  Learn more: http://www.losangelesworks.org/businessServices/DevelopmentReformStrategicPlan.cfm

Source: Chris Gomez-Ortigoza, Marketing Consultant, (626) 376-9840 x14

Spotlight on FOLSOM

Located northeast of Sacramento, the City of Folsom is just south of Folsom Lake in Northern California.  Folsom is currently the most desirable sub-market in the Sacramento Region for homebuilders, where average sales prices of homes are now close to DOUBLE those of the overall region.

Folsom Fast Facts:

  • Residential land north of U.S. Highway 50 traded for $1 million per acre (raw) at the peak of the market in 2005.
  • At the current absorption pace, Folsom will be out of finished lots by 2014/2015.
  • Folsom enjoys a 5.7% unemployment rate (current California unemployment is 12%), and thus has minimal foreclosure activity.
  • Folsom’s schools consistently rank in the upper echelon of school districts not only in the region but in the entire state.

Landmark Folsom REO Property Available for Sale:

Land Advisors Organization is currently marketing Carpenter Ranch – a 1,019-acre master planned community located in Folsom’s Sphere of Influence in Sacramento County.

The property rests along 1.5 miles of Highway 50, and was recently entitled for 2,263 residential units and over 3 million square feet of commercial uses.  Previous investment in the land totals over $100 million.

Source: Jim Radler, Senior Marketing Consultant, at (916) 784-3329 ext. 11.

Santa Clarita Valley Economic Snapshot: IMPROVING

Santa Clarita Valley Economic Development Division’s Economic Snapshot report for July indicated that the Santa Clarita Valley (SCV) local economy is doing better than many of its surrounding communities.  Housing prices are moving UPWARD, and the local unemployment is around 8%.  Notice of Defaults recorded between July 1010 and July 2011 dropped 32%.  Read more: http://www.the-signal.com/section/24/article/52558/

SALES STATS: Q3 2011, Santa Clarita Valley (Source: Hanley Wood)

Detached Product

  • Regular Resale: Average Sale Price $435,450; Average Price/SF $195; Closings 394
  • REO Sale: Average Sale Price $339,079; Average Price/SF $169; Closings 121
  • New Home Sale: Average Sale Price $475,857; Average Price/SF $191; Closings 42
  • Foreclosures: Closings 198

Attached Product

  • Regular Resale:  Average Sale Price $240,126;  Average Price/SF $177;  Closings 182
  • REO Sale:  Average Sale Price $182,178;  Average Price/SF $155;  Closings 88
  • New Home Sale:  Average Sale Price $465,167;  Closings 9
  • Foreclosures:  Closings 137

Building permits are still hovering at incredibly low numbers these days in the SCV.  According to a recent Santa Clarita Signal article, most of the SCV’s building permits requested are for single family units.  This differs greatly from neighboring sub-markets where multi-family activity is booming.

Builders and developers are still waiting for lower development fees in the Santa Clarita Valley.  They are having a difficult time finding residential land deals that make sense given the current economic environment. (Development impact fees are currently averaging approximately $50,000 per lot.)

Source: Michel Faris, Marketing Consultant, (949) 852-8288 x14

New Conforming Loan Limits Create Uncertainty in California’s Bay Area

Uncertainty remains high in the Bay Area residential land market following the drop in conforming loan limits to $625,000 from $729,000.

The Bay Area has 72 sub-markets (by Zip Code) where the median home price is now above the new conforming loan limit. What affect this will have on the recovery of the Bay Area housing market is still unknown. Chances are that the compression in loan limits will ultimately correlate to a compression in home prices although not necessarily on a dollar for dollar basis, and the affects could be widely different based on sub-markets.

Currently true “jumbo” loans are priced approximately 100 basis points above “jumbo conforming” loans. Assuming a $626,000 loan and jumbo rate of 5%, a potential home buyer keeping their monthly payment the same will lose approximately $150,000 in buying power.

This phenomenon is most likely to affect the market in the $800,000 – $1 million price point range.  The buyers of these homes would have formerly qualified for a “conforming jumbo” loan if they were putting down at least 20%.  However, they now will need a much larger down payment to stay under the new conforming limits.

At price points above $1 million we would expect there to be a smaller impact, as buyers in that price point have always had to get jumbo loans or put down substantial down payments.

Click the link to see a table outlining the Bay Area sub-markets by zip code with median prices above $625,000: http://www.dqnews.com/Charts/Monthly-Charts/SF-Chronicle-Charts/ZIPSFC.aspx

Source: Steve Reilly, Marketing Consultant, (925) 368-3128