[quote author="bkshopr" date=1241492158]<strong>This $200/sf theory is not possible.</strong>
Construction for an essential efficient house is about $100-$130/sf. The remainder of $70/sf has to cover the cost of land, utility improvement such as gas, power, storm drain, streets, street lights and community features such as monument signs, towers, landscapes, sidewalks, community parks, pools, and recreational centers. Indirect soft costs such as the 250 staff that help to design, process, manage, and build communities. TIC is not a charity organization.
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Unless the builders on the Ranch are plating things with gold, they are not paying that much for construction costs. They are selling new homes in Riverside for that price and making a profit. The builders I talk to tell me that construction prices are around $65/SF right now down from the $85/SF they were paying during the insanity. Some have even driven prices under $50/SF by stripping the units down to the cheapest possible finishes.
The costs of improvements and fees is recouped through the Community Financing District. Here were the Mello Roos are ridiculously high, and the improvement costs are relatively low (they are not flattening mountains here), the actual net cost to the developer for finished lots is quite low, probably closer to $10/SF than $70/SF. Since the Mello Roos are so high, their net cost may actually be zero.
<blockquote><strong>Land Residual must meet minimal standard.</strong>
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Only in the world of the Irvine Company. It must still be positive in order to develop, but it only has to be worth $4,000,000 an acre because the Irvine Company wants to be greedy and make $400,000 per unit sold. I bet most people do not realize how much of the price of a new house is pure profit to the Irvine Company. If they did, there would probably be a revolt...
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There must be a minimum of 20,000 sf of homes for sale in an Irvine acre of land as incentive motivation for developer. This minimum standard equates to $375/sf. Another word one acre of land must yield $7.5 million of sale to pay for all of the items mentioned.
<strong>Density is paramount in the equation.</strong>
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Yes, Irvine will never become less dense.
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Builders would love to sell just one 20,000 sf. home for $7.5 million but that is not realistic in finding a buyer. The 20,000 sf is then divided into many homes to target the likely buyers. For simple math sake Let us divide the 20,000 sf into 10 homes (10 units per acre). Each home will average about 2,000 sf. at $750,000. Decada, a detached condo project, met this density but the footage is no way near 2,000 sf per home. The average for Decada was 1,700 sf. and 3,000 sf shy for one acre. The penalty was the detached nature of the project having too many side yards.
<strong>Use a bag of Tortilla chip to explain a possible strategy for the developer.</strong>
A one pound chip cost $3.75 but consumers wanted a better value during the recession so the company added 33% more to the same bag normally was filled with air. Extra graphic is added near the top of the bag that reads ?33% more chips? The price is unchanged at still $3.75. Savvy consumer like Irvine Renter would immediately perform his math: $3.75/ 1.33 pound=$2.81 per pound. He is happy that the price has reached its fundamental.
This is an ideal scenario because there is no loss in density because the super market shelf holds 36 bags still holds the same number of bags. There is not change in the bag size except replacing air with 33% more chips. This made no difference in delivery and shipping either. The bags fit into the same card board box and stacked on the same wooden pallet.
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This will work to a point, but the Irvine Company has already packed the bag pretty full. The detached clusters and three-story units are all about getting more salable square footage on an acre of land. The only way I see them getting more is to make even more attached product.
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<strong>Developers? solutions </strong>
How would a builder deliver a product that does the same thing as the supermarket and consumer would get 33% more thus lower the price from $375 to $281/sf. First is to pump up cheap footage without changing density. In one acre of land the developer must increase footage by 33% to 26,600 sf for one acre in order to sell homes at $281/sf. Home with yards will be completely out of the picture as demonstrated by using Decada.
A triplex product ?Treo? will likely offer the ?Tortilla Chip? strategy. This product has tiny yards and fewer side yards which is ideal for high footage yield per acre. Its density is at 14 homes per acre thus each home would likely average 1,900 sf. This product is a complete 2 story box without any single story roofs. The garages are at the back via Alley thus allowing the frontal architecture to encroach into the front yard to save land usage.
A typical Triplex has one very bad unit trapped in the middle with 2 good end units. Treo offers all end units that make this product appealing. Downside is the ?bad? unit is a carriage unit built over all garages but silent openers cure the noise issues. The next issue is living over garages where neighbors kept flammable items in the garages such as paint, thinners, cleaning products.
<strong>More third story would be built to increase 33% cheap footage.</strong>
To deliver an entry level home like the 2 story detached condos would be impossible without going vertical. The consumers will be forced to buy the extra 33% just to balance the equation.
We will continue to see future products lacking or no yards, McMansionalized with 3rd floor, triplexes and other attached solutions, Conventional detached products are artificially pumped up with cheap footage without decreasing density, value villages, and cost conscious builders like Pulte and KB homes on the ranch.</blockquote>
(Just a joke, I thought it's funny how people come up with an "ideal" racial mix - what formula do people use or do they rely on a "gut" feeling?)
