HOUSING – Homebuilders Flocking to San Gabriel Valley

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Just when it looked like all the local homebuilding action was taking place in the northern reaches of the county, the eastern San Gabriel Valley has roared back to life.

Homebuilders are snapping up any large, developable properties they can find in places like West Covina, Diamond Bar, Rowland Heights and Azusa. And they’re building single-family homes targeted for mid-to-high-end buyers.

“During the downturn, no one was moving forward with the entitlement process. Now, properties are coming to the market and builders are clamoring to get their hands on them,” said Roland Chavez of O’Donnell/Atkins Co., a land brokerage based in Costa Mesa that has handled several recent San Gabriel Valley deals. “There’s so much pent-up demand for new housing and a lack of land.”

Demand is particularly strong for housing lots that are entitled, have infrastructure in place and are ready to go thereby cutting homebuilders’ risk and the time required to deliver new product. As a result, a finished lot in the eastern San Gabriel Valley that sold for $150,000 about three years ago is now fetching as much as $300,000, Chavez said.

And much of that increased land price is being shouldered by the builders, rather than passed along to homebuyers. In general, the price that builders are willing to pay for entitled land now is about 50 percent of the amount they expect to get for the finished home. In prior years, they had only been willing to pay about one-third of the final home sales price.

“Home builders are saying, ‘We don’t have many choices. We need to react fast,'” Chavez said.

It’s a classic case of supply and demand and the supply of developable land in central L.A. County is very small and shrinking. Unlike the Santa Clarita Valley or Inland Empire, the increasingly built-out eastern San Gabriel Valley has few wide-open, flat spaces that could potentially be blanketed with homes (the exception being a huge nursery site in Azusa).

The parcels changing hands these days are small-to-mid-size infill properties. Take Fairway Estates in Pico Rivera where 194 homes sold in a year. That community is built on a former school site.

Some projects are being constructed on hillsides that would have been considered too risky or costly to develop even a few years ago, when flat land was more plentiful. And views are often touted as a selling point of these projects which command premiums of $50,000 to $125,000.

“We’ve tagged every single property that could potentially be built on, and it’s a small number,” said Craig Atkins, a principal at O’Donnell/Atkins. “Because of job and income growth, sites are being (bought up). It’s a great market, but there’s no land.”

Still, homebuilders are managing to find properties to provide move-up housing and satisfy buyers’ desire for safe enclaves in eastern San Gabriel Valley communities.

Moving on up

“Most of these people want to stay in the area, and you have move-up buyers looking for move-up housing that hasn’t been available,” Chavez said. “It’s amazing how many people are professionals in the San Gabriel Valley from, believe it or not, entertainment. There’s also a lot of entrepreneurs, because of the City of Industry, and manufacturing jobs, and a high-tech influence occurring.”

Lots in the South Hills Estates neighborhood of West Covina were originally graded way back in 1990, using contractors from out of state because local firms were booked solid. But in 1991, the market tanked, and the land sat idle with no takers for nearly a decade. Then late last year, Newport Beach-based Reilly Homes bought 58 of the single-family lots, followed by Ryland Homes’ purchase of 42 lots last month.

Reilly’s homes will vary in size from 3,500 square feet to 4,500 square feet, with asking prices in the mid-$500,000 to $600,000 range. Ryland’s homes will be similar, but toward the lower end of those size and price ranges.

“The San Gabriel Valley is a highly populated region with lots of businesses and growth and employment centers. It’s a highly supply-constrained market,” said Mark Beisswanger, president of Ryland Homes’ L.A. division.

In Valinda, an unincorporated community adjacent to West Covina, an 11.3-acre site that was formerly the Suburban Water Co.’s local administrative office will soon become a gated, 86-unit single-family housing development. Homes will be priced from $100,000 to $200,000.

In Diamond Bar, which is not typically considered a luxury market, Pulte Home Corp. recently acquired a site where it plans to develop 127 luxury homes. The project has been dubbed Diamond Hills.

“There’s no new product and these will have tremendous views and great access to local job markets,” Atkins said. “You can have a backyard and front yard and great school districts.”

Other projects sprouting

Pulte is also developing the Waterfall Estates project in nearby Rowland Heights. In that same community, K. Hovnanian Homes has bought 56 large, single-family lots on which it plans to build homes in the $700,000-$850,000 range.

And three more, as yet unannounced subdivisions are in the works in the eastern San Gabriel Valley, which together would add 200 new homes, in addition to numerous smaller projects of around a dozen homes each, Chavez said. O’Donnell/Atkins brokers are combing the entire valley for redevelopment opportunities, including dilapidated shopping centers that could be razed and replaced with new housing.

Azusa has what is by far the area’s largest open parcel where the Monrovia Nursery operates but development of that property has not been welcomed by residents.

In a referendum last summer, voters overturned the City Council’s approval of the 1,602-home Rosedale project, which had been proposed by Lewis Homes and the Monrovia Nursery. The land owner currently is regrouping and trying to figure out the best approach to developing the site, said Roy Bruckner, Azusa’s community development director.

Residents’ concerns revolved around traffic, pollution and the quality of homes being proposed there. The city is currently undertaking a complete general plan overhaul and is revisiting what type of housing it wants to see built in the area, Bruckner said. He said the community needs more high-end housing.

“There’s a sense of making sure we get high-quality development because we had so much cheaper housing (built) in the ’50s and ’60s, a lot of which has turned into rental units,” Bruckner said.

While the Rosedale project may be stalled, several other single-family developments in Azusa are moving forward. They include an 84-unit project of mid-range homes on an infill site south of the 210 Freeway and a 327-unit, high-end project on what currently is an avocado grove and horse ranch. Another 30-home subdivision is on appeal and may be reduced to 26 homes.

“We see a lot of turnover in existing housing product and quite a bit of interest in new construction. We’re kind of running out of land now,” Bruckner said. “(Residents) want to move up and be closer to work. In order to find affordable housing, you have to move past Fontana, and that’s a haul to drive to Pasadena or downtown L.A. All these infill sites have become attractive to developers.”

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