May 2 (Bloomberg) -- PulteGroup Inc. and Lennar Corp. are among eight builders buying the first 726 lots at the Great Park Neighborhoods, a residential community in Orange County, California, that has struggled to open since 2005.
“This is big signal in terms of the Orange County market,” Emile Haddad, chief executive officer of FivePoint Communities Inc., the Aliso Viejo, California-based developer of Great Park, said in a telephone interview. “It’s big in terms of the project itself when you had a lot of doubters saying it would never happen.”
Demand for new homes in Southern California, where the U.S. housing bubble was fueled by locally based subprime lenders such as Countrywide Financial Corp. and New Century Financial Corp., has come back as buyers take advantage of low mortgage rates and few existing properties are on the market.
FivePoint has permits for 5,000 homes at Great Park. Irvine Co., Orange County’s largest developer, is opening a new community with 3,800 homes this year, and other builders are opening additional communities with 3,300 homes -- the most in the area in about eight years, said Mike Balsamo, chief executive officer of the the Building Industry Association of Orange County.
New Home Co., a closely held builder based in Aliso Viejo, tomorrow will break ground on Meridian, a 79-unit condominium project on a golf course in Newport Beach with prices ranging from $1.5 million to $4 million.
“It’s been more than 20 years since a new for-sale residential community opened in this part of Newport Beach,” Tom Redwitz, New Home Co.’s chief operating officer, said in an interview. “Nothing’s been for sale for a long, long time.”
Hovnanian Enterprises Inc., William Lyon Homes Inc., MDC Holdings Inc., Ryland Group Inc., Taylor Morrison Home Corp. and Shea Homes LP are the other builders that won bids for lots at the Great Park, FivePoint said today in a statement.
“It is great to see the project happening and we’re very delighted to be part of this new community,” Richard Douglass, Southern California division president of Ryland, a Westlake Village, California-based builder, said in the statement.
Construction of the community’s initial model homes will begin this month, and the first residents probably will be able to move in by the end of the year, Haddad said.
Lot prices, which Haddad wouldn’t disclose, are “not significantly below where the market was in 2005 or 2006,” he said. While the homes are currently slated to sell for $600,000 to $1.2 million, high demand may push prices up, he said.
Lennar, a Miami-based homebuilder that owns 60 percent of FivePoint, acquired the 3,700-acre (1,500-hectare) site of the Great Park Neighborhoods, formerly home to the El Toro Marine Corps Air Station, for $700 million in 2005. The project was recapitalized in 2010 to buy out the interests of FivePoint’s biggest partner, Lehman Brothers Holdings Inc., which filed for bankruptcy in September 2008.
FivePoint plans to open a second Great Park phase in 2014, and has applied to develop as many as 11,000 homes at the site, including 6,000 to be built on land currently approved for commercial space, Haddad said. Great Park is about 40 miles (64 kilometers) southeast of downtown Los Angeles.
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