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Most Builders See Rebound in '92

March 08, 1992|DAVID W. MYERS | TIMES STAFF WRITER

The two-year slide in the Southland's new-home sales will end this year, as first-time buyers take advantage of softer prices and the lowest mortgage-interest rates in two decades.

At least, that's the consensus of nearly 120 Southern California developers who took part in the 21st annual Times survey of residential builders.

Of the 124 builders who took part in the poll, 119 provided both sales data for 1991 and made projections for '92.

Those 119 builders expect to sell a total of $6.97-billion worth of new homes in the eight-county Southland area this year. That would be a 21.3% increase from their sales in 1991, which was the worst year for housing since the 1982 recession.

The 119 developers said they will build a total of 34,201 homes in Southern California this year, a 13.3% increase from the 30,187 they built in 1991.

And in yet another sign that builders are more upbeat than they were a year ago, nearly three-quarters of the respondents said they'll have higher sales revenue this year than in 1991. A year ago, only 54% of the builders were forecasting an upturn in sales.

"This year won't be a 'boom year' by any means, but it will be a little better than 1991," said Peter Ochs, president of homebuilding giant the Fieldstone Group.

Builders received even more cheery news last week, when the Commerce Department said sales of new homes rose 13% in January. It was the biggest one-month sales increase in nearly a year.

But while builders are entering 1992 on a more upbeat note than a year ago, they're also voicing concern about a variety of factors that they fear could send their sales sliding again.

The survey asked builders to rate five factors that are impacting their business on a scale of one to five, with one meaning "did not affect me at all" and five meaning "affected me a great deal."

Nearly 90% of the developers said a combination of the "soft economy and buyer hesitancy" hurt their revenue last year, and many worried that those same troubles will cut into their sales in 1992.

The No. 2 problem cited by builders for last year's sales and construction slowdown was "difficulties with project financing," which had ranked last on the previous year's survey.

Many builders complain that the savings and loan crisis, coupled with stricter lending guidelines, has made it difficult for them to get the construction loans needed to build new housing tracts.

The one-two punch of the sluggish economy and tougher lending standards has dealt a near-knockout blow to many developers.

"The depressed economy has kept most buyers away and the unavailability of construction financing has made it impossible to produce houses for the few buyers that exist," summed up Robert Buie of Buie Corp., a mid-sized builder headquartered in San Diego.

"Without construction financing, we are all dead," wrote B. Lynn McCune of Kylcor, a small builder in Long Beach. "Without buyers who are not afraid of losing their jobs, we can't sell. Help!"

Governmental fees that builders must pay before they're allowed to begin a new housing tract were their No. 3 headache, followed by buyer-affordability problems and growth constraints.

The voluntary survey, which was conducted in January, asked builders about their activity in eight counties: Kern, Los Angeles, Orange, Riverside, Santa Barbara, San Bernardino, San Diego, and Ventura. The rankings are based on each company's 1991 sales revenue.

The William Lyon Co. topped the list for the fifth year in a row, based on its 1991 sales of $668.2 million.

But the company expects its revenue to drop to $450.066 million this year, as it builds only 1,966 units compared to the 3,738 homes it built in '91.

The Fieldstone Group was No. 2, with $323 million in sales. The company expects a modest improvement in '92, forecasting $335 million in revenue and the construction of 1,300 homes.

Lewis Homes, ranked No. 7 last year, moved up to the No. 3 spot on this year's survey.

Upland-based Lewis, which built 1,215 homes last year and logged $285.09 million in sales, is representative of many firms that took part in this year's poll.

Even though the company expects to build about 100 more homes this year than it did in '91, it expects sales revenue to drop 9% to $260 million.

"We're building a lot of less-expensive homes for first-time buyers this year because that's where most of the action is," said Randall Lewis, the company's executive vice president. "Mid-priced homes and higher-priced homes aren't selling nearly as well."

Indeed, more than half of the builders surveyed said they were either planning smaller homes or eliminating many amenities to keep home prices down.

And 51% said they'll concentrate on building houses priced under $200,000--homes considered "affordable" by Southland standards.

Although builders who responded to the survey predicted an overall improvement in sales this year, no one expects the modest upturn to do much to improve California's sluggish economy.

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