Builders are slowly starting to wade into the new home market in
the Bay Area, with projects already open or planned for Fremont,
Oakland, San Jose, Walnut Creek and other cities.
Builders are slowly starting to wade into the new home market in the Bay Area, with projects already open or planned for Fremont, Oakland, San Jose, Walnut Creek and other cities.
But unlike the frenzy before the popping of the real estate bubble, when builders saturated outlying areas with too many homes, this time they’re putting their projects close to jobs and transportation.
“Builders are definitely looking at places like greater San Jose, the Peninsula, and maybe Dublin and San Ramon. They are not looking so much at the outlying areas,” said Dean Wehrli, senior manager at Irvine-based John Burns Real Estate Consulting.
And they’re doing this despite a daunting market, with new home sales in the Bay Area down more than 40 percent in June from a year ago.
“If you are in the right place and you have the right product, and you get a price niche that folks can afford, you can definitely sell new homes,” he said.
But it’s a much different industry than just a few years ago. There are about 3,000 members in the California Building Industry Association, a trade group of builders, subcontractors, and other building professionals. That’s a steep drop from a membership base of around 7,200 five years ago. (On average, about 20 percent of members are builders.)
And for the first five months of 2011, there were 588 single-family housing starts in the East Bay, a 28.6 percent drop from a year ago. There were 389 starts in the San Jose metro area, which includes Santa Clara and San Benito counties, or a 4.3 percent increase. In the San Francisco metro area, which includes San Mateo County, there were 117 starts, or a 4.9 percent decrease.
Builders aren’t discouraged. They say there is pent-up demand from buyers following the construction slowdown of the last few years. Many builders went out of business after the housing boom began to collapse five years ago, which created opportunities for those still standing to buy land at bargain prices.
“As the market continued to ebb and flow over the last few years, we were able to take advantage of opportunities to buy (land parcels) in very core and centrally located markets,” said Chris Apostolopoulos, president of Los Angeles-based KB Home’s Northern California division. “One of the fundamental strategies we have is to acquire properties that are close to transportation, retail and jobs.”
KB Home opened new home communities in Dublin, Fremont, Martinez and Walnut Creek in the last three weeks, along with two others that opened earlier this year. Three more are opening in Morgan Hill in August and September, with plans to open an additional one in Santa Clara in the next two months. KB Home opened only five new home communities in all of 2010.
While new home communities are opening, MDA DataQuick numbers show that new home sales are struggling. Some 399 new single-family houses and condos sold in the nine-county Bay Area in June. That’s down 43.8 percent from June 2010, and the second-lowest June ever based on DataQuick records going back to 1988.
Those numbers aren’t discouraging to Apostolopoulos. “With fewer competitors out there and pent-up demand for new homes … we look at it as a wonderful time to be bringing out new home communities,” he said.
SummerHill Homes plans to open new home communities in San Ramon and Saratoga this fall, and in Campbell and San Jose early next year.
“We focus on urban infill locations that have limited new home competition,” said Robert Freed, president and chief executive officer of San Ramon-based SummerHill Homes.
Urban infill locations typically are places that were once a factory, warehouse or other type of facility that are then torn down to make room for a housing development.
Pulte Homes plans to open a new home community next month in Fremont near the future Warm Springs BART station.
“It’s a very good location close to jobs and central to Silicon Valley,” said Steve Kalmbach, Northern California division president for Pulte, a builder based out of Bloomfield Hills, Mich. Another community will be opening in San Jose in September, he said.
Pulte has acquired parcels from other builders to help further its building plans. “We’ve purchased distressed properties, where somebody got in over their head or ran out of money,” he said.
Bob Glover, executive director of the Building Industry Association of the Bay Area, didn’t have any statistics as to how many land parcels have been picked up by other builders in the past few years.
But, he said, “some projects were purchased by other builders. Once it makes economic sense, then it’s just like any business decision.”
