The Flipping Indicator – New Projects Vs. Flipped Homes

The previous Landed blog posted by Land Advisors’ Los Angeles Urban Infill Team highlighted the value increases placed on flipped homes throughout a variety of Los Angeles neighborhoods.  (Re-read: Flipping Over L.A.: Out With the Old, In With the New)

For this post, we take our analysis a step further and compare how values of flipped single family detached homes correlate with those of newly constructed small lot detached and townhome units.  Conveniently, two public homebuilders have opened up projects in Northeast Los Angeles within the past week:

  • The first is Pulte Home’s project in Eagle Rock called Mosaic.  The project consists of 18 Small Lot Detached Units.
  • The second is D.R. Horton’s project in Echo Park called 36 on Echo.  The project consists of 36 Townhome units.

The first chart below represents average sales prices for flips that occurred in Eagle Rock and Echo Park.

This second chart below illustrates the asking prices at both new projects.

In comparing the two charts, note that the average square feet of the flips in each neighborhood is between the smallest and largest unit size at each new project.  You can see that the average flip pricing on a price/sq. ft. basis in each neighborhood lands squarely within the expected price/sq. ft. revenues at each project.  On a nominal pricing basis, the project in Echo Park exceeds the average flip values in the neighborhood, while the project in Eagle Rock is in the same range as the flipped homes in the area.

Why is this significant?  In our experience, properly projecting revenues on infill projects is a difficult task and has chased away a fair share of possible builders and developers.  By utilizing the correct data and local market indicators, the Urban Infill Team has created a system that helps instill a sense of comfort on project pricing for planned infill developments.

Land Advisors’ Urban Infill Team was involved in the acquisition of both of the above referenced projects, and our projected pricing was very similar to the values illustrated above.  If you are interested in discussing valuation, acquisitions or dispositions in the Urban Los Angeles market please contact…

Source:  Chris Gomez-Ortigoza, Marketing Consultant, (626) 376-9840 ext. 14; Richard Byrd, Senior Marketing Consultant, (626) 376-9840 ext. 13; and Tim Barden, Marketing Consultant, (949) 852-8288 ext. 30

Big Moves and Bright Ideas in Northern Central Valley

Amazon.com makes a move (to CA): Even the cynics out there are saying that NOW is the time to buy a home.  With interest rates and home values at an all time low, it is certainly a buyer’s market these days.  The problem is remains however, that limited numbers of potential buyers have enough equity ready to put into buying a new home.  The unemployment rate in California and nationwide is still painfully high and we are all waiting for job creation to help boost the economy and the homebuilding industry. 

Good news for California:  Amazon.com made a promise last year to bring 10,000 new jobs to California, and now, according to SacBee.com, the online sales giant is apparently ready to make good on that pledge, starting in western Stanislaus County.  Amazon is expected to announce soon it will build a 1,500-employee distribution center off I-5 in Patterson, west of Modesto.

Patterson profile:

  • Although Patterson has experienced few to no home sales in last two years, the city has shown to be a viable submarket for home sales. From 2002 to 2009 just short of 3,000 new homes sold in this area.
  • Fewer than 200 “finished” lots remain within the City of Patterson.
  • 1,500 new Amazon jobs will dramatically reduce current 18.4% unemployment rate.

New Vision for Merced: At the Merced City Council meeting this month, the public weighed in on the Merced Vision 2030 General Plan, which City officials hope will turn Merced into a dynamic urban entity by 2030.

The concerns at the meeting varied… UC Merced officials were elated with the inclusion of the campus and the University Community housing project in the “Vision.”  On the other hand, some city residents were concerned about the population projections and the potential impacts on agricultural land.

The City Council approved the plan by a 6-1 vote.  Castle Farms, a proposed mixed-use development at Highway 59 and Bellevue Road, and Mission Lakes, a community plan bounded by Mission Avenue to the north, agricultural land to the south and Highway 59 to east, were both left out of the plan because some of the City Council members believe the footprint of the plan is too big.

Bright Idea on Campus: They say college is the time to “find yourself.”  Well the students of the newly-opened University of California, Merced are taking that idea to the next level, and are finding themselves in some pretty nice homes.  Many students are ditching the traditional, crammed on-campus dorms for a more spacious and luxurious option: the vacant foreclosed “McMansions” left behind by the housing boom.

Nearly 5,200 students attend UC Merced, but the university has only enough campus housing for about a third of its population.  The Merced community is hearing mixed reactions from the students who are renting the 5+ bedroom homes and using them in an unconventional way, but overall the sentiment is currently positive.  Neighbors are happy to not have homes left vacant on their street, and the current title holders are happy to be collecting some kind of income from the properties.

Source: RJ Radler, Senior Marketing Consultant, (916) 784-3329 ext. 12

1.21 Gigawatts?! Trying to Get Back to the Future in Fresno…

It seems as though the Fresno residential land market is revisiting its past… residential raw land is currently selling for prices paid back in 2000.  During the market peak five or six years ago, unimproved vacant land in “A” locations sold in Fresno for $300,000 per acre.  Today it’s going for prices ranging from $60,000 to $85,000 per acre.

Local homebuilders are in the early stages of reloading their land inventory.  Housing Capital is playing a huge part, as the lender is one of a few banks enthusiastic to offer A, D and C loans.

Recent Land Deal:  Homebuilders are buying un-entitled dirt again but in smaller bites.  A local builder just purchased 10 acres of unimproved land in the heart of northeastern Fresno.  

Fresno local homebuilder Granville Homes is knocking the dust off of Westlake, a master planned community in west central Fresno that has been “mothballed” for the last five years.  The 430-acre project is now scheduled to break ground sometime in 2012.  Westlake is a promising master plan by a talented local builder.  This could spur a land rush from builders and developers alike looking to ride the coattails of this new community now anchoring West Fresno.

According to Fiserv, a financial analytics company, Madera is on the mend…  Fiserv identified Madera (about 25 miles northwest of Fresno) as a “winner” in a long list of sub-markets around the U.S. in terms of housing valuations.  The Chicago Tribune article states that home values across the Nation are anticipated to decrease in the coming year, but that home values in the Madera area will gain 15.5%!

Fresh from the FresnoBee.com News Blog… the number of foreclosures in the Central Valley fell during the third quarter of this year compared to the same time a year ago.  However, building permits are way down. In Fresno, only 19 single-family permits were pulled in September compared to 113 in August, and 120 permits a year ago at the same time. …Adapting to changing demographics and consumers’ needs, Lennar Homes rolls out a new model in the Central Valley.

So, despite Fresno residential land values resetting to decade lows, Land Advisors is looking to blast a few gigawatts into the market with two large Fresno area listings in early November – stay tuned!

Source: Mark Utman, Marketing Consultant, (559) 449-4500