Spring 2014 Pricing - Best Guess on the Resale Market?

[paperboyNC]

Accurate.  I've talked to a lot of folks during my home search at phase releases, open houses, etc.  A lot of folks are moving up from the 1800 sf+ attached product to the 2500 sf+ SFR.  The smaller SFRs just don't offer enough space to justify the move/upgrade.  For me personally, I lived in a 2,200 sf attached condo.  Moving to something like a Mendocino in SG doesn't make much sense.  Sure I would get a driveway and have no attached walls, but ehhhh.

If I were to move in the area and not much had changed in my life I might look for a good SFR in foothill ranch or lake forest that was the same price as my detached Irvine condo but with no mello roos and a lower HOA. It sounds like a good swap but it's not for the following reasons:

A) Transaction costs when buying/selling will likely eat into 10% of the homes value
B) My property taxes would jump because I'm locked into the lower value with my current place which would nullify the mello roos savings
C) The new place would like need significant renovations

So I think I'll stay where I am for a few more years at a minimum.

 

[bones]

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[paperboyNC]

You forgot reasons D through Z: you would have to live in lake forest or foothill ranch.

True. My wife probably wouldn't like that. But I think that there are some neighborhoods in Lake Forest better than Portola Springs (and more centrally located and closer to work).

 

[bones]

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[paperboyNC]

You forgot reasons D through Z: you would have to live in lake forest or foothill ranch.

True. My wife probably wouldn't like that. But I think that there are some neighborhoods in Lake Forest better than Portola Springs (and more centrally located and closer to work).

Maybe but you already voted with your wallet. Since you bought at the downturn, you could have snatched up a pretty sweet place in lake forest then for cheap. But instead you bought a detached condo with MR on no lot in irvine. Just saying

I had a different job at the time on the Tustin side of Irvine. Now I work on the Lake Forest side and would have likely bought a different place.

 

[socal78]

I might look for a good SFR in foothill ranch or lake forest that was the same price as my detached Irvine condo but with no mello roos

Wut? We do pay Mello Roos, Silly Willy.

It is the S3 Mello-Roos (Orange County CFD No. 87-4). It will mature/end in 2019.

 

[socal78]

I might look for a good SFR in foothill ranch or lake forest that was the same price as my detached Irvine condo but with no mello roos

Wut? We do pay Mello Roos, Silly Willy.

It is the S3 Mello-Roos (Orange County CFD No. 87-4). It will mature/end in 2019.

Isn't baker ranch doing the same thing that Lambert Ranch did and baking the MR into the sales price (so they can advertise no MR)?

Right, there will be no Mello Roos at Baker Ranch.

 

[irvinehomeowner]

Hehe... baking at Baker's Ranch.

Not sure how that area looks at Baker's Ranch but for places like The Branches and Willow Bend, it's not really costs being put into the sales price because there is little to no infrastructures costs in those places. It's just profit which still irks me because back in the 90s there were two similar in-builds in both Woodbridge and University Park by Standard Pacific and they didn't have "no MR" inflated prices.

 

[Logik]

Assuming more inventory comes on line next year that may affect the supply/demand situation to temper the price increases.  However, is it possible that all the new construction will increase the labor cost of building new homes and how will the builders deal with that cost input.  Will they pass that on to the homebuyer via price increases or just eat it themselves with smaller profit margin.  Many variables at play including interest rates.  Just wondering what others think may happen and whethere there is prior history that give us some insight into how this could play out.  Thoughts?

 

[OpenSky]

;D

 

[paperboyNC]

One minor detail: TIC's cost for the land on their developments is essentially zero (improvements excepted, of course).

Brother is doing a custom build in the bay area on a 3k sf place, his cost is $150 per square foot. Tract homes at scale? I'd bet it's very close to $120/foot.

Costs could go up 20-30% and they'd still be making a killing after land improvements (2-3x profit).

On GP - my scorecard ran out of room a few years ago, but IIRC, 5P traded dirt for improvements so not sure how that shook out. Seems like the city is the one writing the checks.

Luckily some Builder's have public financials such as Pulte:
https://www.google.com/finance?q=NYSE%3APHM&fstype=ii&ei=Frp1UsCXDY-clQPzfg

In 2012 they made 3.7% profit after losing money each of the previous 3 years.

KB Home hasn't made a profit in 4 years:
https://www.google.com/finance?q=NYSE%3AKBH&fstype=ii&ei=brp1UvCSM4islAOFngE

Obviously there is something wrong with your math.

 

[OpenSky]

 

[paperboyNC]

One minor detail: TIC's cost for the land on their developments is essentially zero (improvements excepted, of course).

Brother is doing a custom build in the bay area on a 3k sf place, his cost is $150 per square foot. Tract homes at scale? I'd bet it's very close to $120/foot.

Costs could go up 20-30% and they'd still be making a killing after land improvements (2-3x profit).

On GP - my scorecard ran out of room a few years ago, but IIRC, 5P traded dirt for improvements so not sure how that shook out. Seems like the city is the one writing the checks.

Luckily some Builder's have public financials such as Pulte:
https://www.google.com/finance?q=NYSE%3APHM&fstype=ii&ei=Frp1UsCXDY-clQPzfg

In 2012 they made 3.7% profit after losing money each of the previous 3 years.

KB Home hasn't made a profit in 4 years:
https://www.google.com/finance?q=NYSE%3AKBH&fstype=ii&ei=brp1UvCSM4islAOFngE

Obviously there is something wrong with your math.

You're kidding, right? You think national builders' financials (who have very little Irvine exposure) translate into local cost dynamics?

No, there's a lot wrong with your understanding of Irvine real estate. Study up on The Irvine Ranch, TIC/CPH/IP, then the Great Park. TIC sets the market and the cost basis for the dirt is essentially zero. That's a massive contrast from nearly every other US development where the land ownership is long-since disconnected from the builder.

Think about that for a minute... Irvine Ranch has been owned by the Irvine Company for generations. TIC (nevermind the ownership of the parent entity) farmed the land then developed the land and now builds stucco boxes on the land as a final measure of value extraction of the dirt ... but not before building retail, commercial and apartment developments that feed off the very residents that cashed them out of the dirt in the first place. We're all TIC's collective b*tch.

TIC has nothing to do with the Great Park which you are lumping in there as making enough home to eat 20-30% increases in material costs. Even TIC has land cost - it's the tradeoff between keeping the land themselves compared to what they could get for selling the land to another builder.

I know all about the Irvine Ranch history.

 

[OpenSky]

 

[paperboyNC]

First, I distinctly kept GP separate from TIC.

Second, GP is emerging as a "value" play vs TIC's "premium" villages. The margin expansion hits just keep on coming for TIC...

Third, drawing conclusions from national builders financials to TIC makes zero sense. Homebuilding is a sideline for TIC, and builders would give anything to be in TIC's position of owning land outright and having the freedom to option it to builders or build on it themselves.

Regardless, if you have different figures to share with us about the cost per square foot to build, please share.

I have no idea what the actual construction cost per square foot is. I do know that builders have the following additional costs:

- Land Cost
- Cost of Land that is going towards roads, sidewalks, alleys, parks, pool, etc.
- Land improvement costs (and no, mello roos does not pay for this) such as grading, building roads, sidewalks, landscaping, etc.
- Property tax paid on land / improvements before it is all sold / handed over to the HOA
- Cost of carrying the model homes before they are sold
- Interest on all of the upfront costs
- Salaries for management, sales persons, etc.
- Overhead for their offices, sales offices, etc.
- Marketing costs
- Architects / Floorplans
- Permits / City Relations
- Broker commissions / bonuses and commissions for their own staff
- Appliances that are included
- Warranty Coverage
- Insurance / Lawsuits

And I know that publicly traded builders are either losing money or making a small percentage of profit.

TIC is rich because they own a bunch of land that they convinced the city to let them develop. This is completely separate from anything. The rest of the builders don't have land they owned from back in the day so it's really irrelevant.

 

[OpenSky]

 

[paperboyNC]

There are obvious economies of scale, but yah, some fixed costs on doing development. I tentatively called this "improvements" but your breakdown is more instructive. Still, some of these items are a rounding error, especially on a marginal basis.

It strikes me that GP *should* be the more costly village to develop, yet it markedly less expensive than competing TIC properties.

They've got to make up for the higher mello-roos and the toxic stigma right? Maybe they also have more land to work with which makes large lots more logical?

There is no doubt that even though TIC is rich as heck that they still try to squeeze every last dollar out of their buyers and spend as little as possible.

 

[bones]

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[paperboyNC]

Totally evident by their refusal to have IPac build anything over in Portola Springs.  They rather sell the land there to outside builders b/c they know they can't charge the ridiculous premiums they're charging in the rest of their villages and have to sit on carrying costs since developments there tend to sell much more slowly.

I'm thankful for that. Portola Springs has much more variety than the developments with only one builder.

 

[bones]

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