I appreciate the participatory responses. The data is not conclusive but it does shed light to the desire of the consumers. IHB members are mostly first time buyers. Most technology savvy users tend to be the younger generation buying their first home. Move up buyers are represented by the 4th item on my poll and the percentage is low compared the 2nd and 3rd entries consisted of mostly entry level buyers.
Places like Laguna Crossing and Orchard Hills are the farthest along in development. They are also the riskiest for the land seller at this time because the pool of equity rich move up buyers is infinitesimally small. Formerly glorious days in Irvine luxury homes were the majority of the market shares drew move up buyers within an 8 mile radius. 80% of new home buyers were Irvine?s neighbors.
Recent grading activities on the flat lands are sign of shifting gear to accelerate the entry level products to meet the demand a few years from now. Level land is much more conducive for higher density entry level housing than hillside terrains.
Entry level homes in the past represented a smaller inventory within an array of larger home segmentation. Larger homes and lower density yield higher profit margin for land because less land was wasted for side yards and garages (components that the builders can?t charge the consumers for). Entry level homes lesser footage must be made up in quantity to yield decent land profit margin. The biggest hurdle is to overcome land consumption for more garages, longer road, more side yard separation between homes, greater guest parking count, and much more utility infrastructure. The dilemma is builders can?t pump up the salable footage because it will price out the entry level buyers. The only solution is to increase density. This is the reason why an entry home cost more per SF than move up homes.
Very few architects have the skill to balance the complex design and economic formula for entry level homes. Unrelenting land prices must require the top tier architects in solving this equation.
When most of the products are entry level it is extremely difficult in finding differentiations and segmentation. Apartment like condos, townhomes, detached condos, and detached narrow alley load homes are the only 4 possibilities. AI may invent a few more for me. I favor the detached solutions over attached homes. Builders will offer more footage incentive in attached homes to offset its negative premium.
Flat land developments I have seen so far are Woodbury East, Stone Gate, and another large parcel between Woodbury and Freeway 5. The likelihood of entry level homes at these sites is strong.
The big question is why should the developer carry the cost now and wait until 2011-2012 to release new homes at rock bottom prices? Obviously the waiting strategy is to maximize profitability.
For those who selected item 2 on the poll should really reconsider resale between now and then prior to new homes benchmark pricing for greedy home sellers. The lack of depreciation in Irvine is also contributed by the hope of higher benchmark pricing.
