New Construction Boom in N. Orange County – Part 1 of 3

There are very few things in life that overwhelm my senses more than viewing a model home for a new development. After I received my dose of “sensory overload” on the Grand Opening of Blackstone in Brea, I just realized that my buyers have an added segment to their selection outside of (long) short sales, bank repos, and rare resale homes with equity. Prior to the opening of Blackstone and the release of Toll Brother’s Preserve commmunity, there wasn’t much selection for a buyer who didn’t feel comfortable about buying a fixer-upper distressed home.

After almost 4 years of a huge price discrepancy between distressed homes and new construction, it seems the gap has finally narrowed. Builders seem to have priced their recent phases correctly to compete with the resale & distressed market. Homebuyers responded to Blackstone’s marketing effort by having thousands attend the Blackstone Grand Opening and nearly selling out all 1st phases in the communities of Castillian, Serano, and Amber within weeks. Everytime I speak to a prospective seller in the segment of $450,000 and up, I make sure to point out their home will be competing against seductive new homes and their models.

Unfortunately, most will not be able to take advantage of this “New Construction Boom.” There are already rumors of price increases by both Standard Pacific and Shea on their future phases. Most non-sophisticated buyers will wait until the market is “strong” (i.e. prices have already gone up) and it will be too late for them. Add to the mix the would-be “move-up” buyers who did a short sale, experienced foreclosure, or bankruptcy during these hard times and it translates to a select few who will be able to take advatage of these low prices and interest rates.

For those who have survived the cut, I’ve prepared this 3-part blog to help you navigate (and think) beyond the fancy decor and smells of the model homes:

1. Entry-level & First Time Homebuyer segment (Upper $400s to upper $500s)
2. Mid level & “move-up” segment (Upper $500s to Mid $800s)
3. Luxury segment ($800,000 to $1.3 M)

[youtube http://www.youtube.com/watch?v=ONc_SVZRPIQ?rel=0&w=425&h=349]

Community comparison – Click to enlarge full table

Sorry — the former Engineer in me has to view things from a more structured view. I hope this table helps. It breaks down every community along with it’s Pros and Cons.

What I Liked:The Blackstone Communities (Serano, Jade, Amber, and Castillian) are willing to consider an FHA loan where you can place as low as 3.5% down. I mention that because I always get a kick out of the armchair Real Estate “expert” who says you can’t get a loan without 20% down. Additionally, the prices seem very competative against the distressed and resale market. My favorite are Tierra and Encanto homes that are walking distance from the brand new Yorba Linda High School. Encanto seems to be perfect for the “empty nester,” or retiree looking to move to a smaller, single level home. Tierra may be the best buy out of all the homes in this segment: No mello roos and the Grand Opening “buzz” is gone.

What I didn’t Like
For the buyer who can’t visualize the completed product, you have to know that the Serano and Amber homes will be VERY crowded compared to the current, open feel of the models where no homes have been constructed next to them. The Serano homes will have “garage alleys” consisting of streets with nothing except garage doors and greenbelt walkways on the front sides of the homes. Amber homes will have shared driveways almost identical to the Tierra homes in Yorba Linda. Those considering the Amber homes in Blackstone might want to visit Tierra in Yorba Linda to get an idea how the finished product will look. After to add to the monthly cost the mello roos and $300-per-month association dues, the prices are not as good as they seem.

While I’d personally prefer the Tierra Community of Yorba Linda, I’d have to admit that the distance from both the 57 and 91 freeways would be a concern.

Don’t miss Part 2 – Mid level & Move-Up Segment: Crescent Heights, The Preserve, & Herritage