A few Home for the next few years.

NEW -> Contingent Buyer Assistance Program
bkshopr_IHB

bkshopr_IHB

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In my series of posts I talked about the importance of branding. The company philosophy of trophy brands will terminate the product line instead of putting most of it on sale. I made my prediction several weeks ago regarding tightening up supply on the Ranch. We are facing the most difficult period in getting financing. Home prices on the Ranch have to compete with VOC, Ladera Ranch and resale.



This incubation period is for invention of the clever designs so when the market turns around the products will define and represent the decade of 2010. Most of the prior housing products will be obsolete like most camera, computers and TVs. Bren is out to build a legacy for being the most innovative builder of our environment. I seriously do not think he will follow the footsteps of VOC because he needs to sustain cash flow for his land and community division. He has just donated $20 millions to UCI to build the Bren Law School. Recent donations to UCLA, UC Santa Barbara, and UC Berkeley placed him as the top philanthropist to higher learning institutions for the last decade in America. I seriously do not think the cash flow is the issue here to liquidate land in order to sustain business operation. IMO his goal is to stabilize the economy of Irvine. First is to limit the supply of housing and let other desperate sellers settle the terrain as the bottom feeder of the ecosystem. This terrain when stabilized will be a good foundation to re-grow a good financial forest. Housing in Irvine will collapse when cheaper, newer and better homes were to be released. Resale could not afford to have more new inventory competition fighting for the limited number of qualified homebuyers.



There is still faith for those who desperately holding on to homes even though the mortgage is re-set. Unlike the Inland Empire the light at the tunnel is blocked by an in coming train. Homeowners are walking away from their homes in groves. Homeowners in Irvine still believe that their home is worth holding on to. The bargain price is still non existence in new homes. This is the bar where all future prices will be based on and this will affect IAC rental rate, retail property rent rate, and business property leasing rate. The ripple effect is disastrous.



No new homes will be released to compete and flood the inventory supply. According to the builders Orchard Hills, Stone Gate, Laguna Crossing and numerous communities will be postponed indefinitely until after 2010. Phase one of OH may be released due to some construction has already occurred but will quickly close again for market adjustment.



Limiting the supply is one of the most important strategies in preserving the brand integrity. Many brands in the past could not make a comeback because the consumers’ perception and confidence is lost. In order to stabilize the local economy IMO TIC by freezing its residential developments is trying to avoid other potential bad repercussion to our local economy.
 
<p>Geez are you related to Bren?</p>

<p>He is the issue. The Irvine company owns all the land. They release the land in bit's and pieces to keep the land prices High.</p>

<p>High Land prices means more money for TIC. Every builder knows that if you want to buy a big chunk of land in OC to build on there is only one company to go to. Then you pay through the nose. </p>

<p>If you build a hotel or a golf course on a land lease you can bet he will take it back at the end of your lease.</p>

<p>What other city in Orange county has as much undeveloped land as the Irvine Company owns. </p>

<p>I love the fact that Irvine was chosen to build the low to mid income housing that must have blown Bren right out of his office.</p>

<p>Most of the people that work for the Irvine company can't afford to live in Irvine. </p>

<p>His master plan is to hold onto the land until houses in Irvine have to sell for 1000 a sf because he can charge 400sf for dirt.</p>
 
<p>Query, and my apologies if this is beyond your expertise, but isn't SCAG (Southern California Association of Governments) going to be quite upset since Irvine just told them "we have no land for your affordable housing mandate." {That's the polite translation of what Irvine said.} </p>

<p>If there is open land with basic infrastructure already built, what are the odds that SCAG might engage in a little eminent domain? </p>
 
Irvine employers are already having hiring and retention problems due to the cost of living. I work for a top 20 OC employer and I know for a fact that we're suffering because of this. If the bulls and the Brens get their way, we'll have two million dollar studio condos and not a single job for anyone. Employers will head for greener pastures -- A few in SoCal already have.
 
Eff....wait you didn't hear that liquidity has just flooded back into the market so we will again live the days of 2004 and 2005 where loose lending, no underwriting, and double digit home appreciation is the norm.





I agree it would be prudent to cut new construction however I don't think any land owning company, person, or other entity will see the type of revenue they have seen in the past few yrs for quite sometime in the future.
 
<blockquote>Limiting the supply is one of the most important strategies in preserving the brand integrity</blockquote>


I forgot this part. It is also called price fixing!!!
 
<p>trenter, </p>

<p>it is their land, and as long as they are not in collusion with OTHER LAND owner to limit the supply, it is not price fixing. </p>

<p>We can all hate them for making that much money, but as long as they are not breaking any laws, they can do what they want to do. Market will ultimately decide the value of the land. Builders won't buy the land if they can't sell the house at a profit. eco 101. </p>
 
<p>Don't count on laws to stop price-fixing.</p>

<p>Ever try to buy a professional-level appliance? ANY professional-level appliance?</p>

<p> </p>
 
<p>VOC, Ladera and Portola Springs will be the only places with new homes. I remembered communities active during the last recession. Aliso Viejo was most active development pumping out entry level houses. Aliso Viejo and RSM were the aftermath of the last recession. Their community quality and legacy are landmark case studies of what not to do. Residents of both cities refer themselves as South County residents.</p>

<p>Wil the home shoppers in the market for a new home pay extra for a very limited supply available in good locations? Will TIC's strategy work?</p>
 
<p>Bk,</p>

<p>So u're saying they're holding off on building out Stonegate, part of OH, Laguna Crossing, etc.? Is this your opinion? Or is this factual?</p>

<p>If factual, where did you get this info. Just trying to understand. Thanks.</p>
 
bkshopr,





How can you say that TIC will just postpone Orchard Hills, Laguna Crossing, Stonegate, etc. until 2010? I drive by Laguna Crossing regularly and I see plenty of construction vehicles moving around. Do they just get to a certain point of land grading, then just hibernate for years?





...oh wait a minute...I just went to TIC website and it now says that both Orchard Hills and Laguna Crossing are coming in 2009!
 
<p>That's why the site at Stonegate came to a halt a couple of months ago. And someone here ask about Orchard Hills cause it seems forever for them to build out. Now we know. Thanks!</p>
 
So... TIC will rather sit on their land and generate no revenue for a number of years? That sounds far fetched. Maybe they have other revenue streams that will enable them to continue operating as a business, but what will they do with all the employees in the residential sector? Are you saying there will be massive layoffs at TIC? And then hire back in 3 years when the market improves? Or they will get re-assigned to other areas of the company? That sounds even more far fetched. That "strategy" sounds very difficult to pull off for an on-going business. For investors, sure! Sit on the sidelines until it's time to jump back in. Doesn't quite work that way for companies, however.
 
<p>It takes time to get the infrastructure (utilities, general grading) and land parcels ready for the builders. Remember, Irvine Company is the DEVELOPER, not the home builders. It makes sense for the developer to get the land ready if they already planned on it. They have to do it anyway. One will think it MIGHT be cheaper to get the work done now since the contractors are not as busy. </p>

<p>In terms of publishing time of the opening is just a "target"...again it will be completely driven by the market. Given the credit crunch right now, I can't image any builders will make any firm committments. Scaling back investments and keeping cash on the balance sheet are the fashonable things to do right now for the builders. All this can change if market improves...</p>
 
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