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Buyers Come Knocking for Bay Area Homes

March 3, 2013 | Silicon Valley Business Journal

By Nathan Donato-Weinstein - Real Estate Reporter

After years in which rental projects in Silicon Valley were king, new-home construction has returned. Credit goes to a number of factors: low inventory, strong buyer demand and skyrocketing rents.
“We’re back in growth mode,” said Robert Freed, president and CEO of SummerHill Homes.

In Santa Clara County, existing single-family inventory totaled 1,169 units in January, down 57 percent from a year ago, according to MLSListings.com. Finished new-home inventory is also low, with about 1.4 months’ supply available at the end of 2012, according to industry tracker Metrostudy.

At the Boulevards in Santa Clara, SummerHill raised prices on new releases by $90,000 last week compared to a month ago. The community’s 36 homes are between 2,235 and 2,717 square feet and sell in the $1 million range.

“It’s a classic supply and demand,” Freed said. “I have 200 pre-qualified buyers for the Boulevards, and I only have 24 of them.”

San Ramon-based SummerHill was slated to close this week on a former Chevrolet dealership at 660–666 W. El Camino Real in Sunnyvale where it will build 103 townhomes, Freed said. He is also working with Grosvenor Americas to build nearly 200 residential units as part of the 20-acre “North 40” planning area in Los Gatos.

“We’re seven years into this downturn, and we’re seeing (buyers) start to return rapidly,” said Chris Apostolopoulos, president of KB Home of Northern California.

Executives cautioned that while the new-home market is improving, it is not recovered fully.

One factor that could hold back the floodgates is availability of developable land.

“There are just fewer land opportunities, and then many of them that are available, especially in San Jose, are designated for multifamily rental,” Freed said.

The result: Prices for remaining sites are rising. Land that was going for $2 million an acre two years ago is now going for up to $4 million, Freed said.

That hasn’t stopped publicly traded KB Home, which has been one of the most aggressive in this market.

It’s in contract on six properties in the Bay Area that could bring more than 1,000 units to market, said Apostolopoulos.

That number doesn’t include its major San Jose projects, Communication Hill and the San Jose Flea Market.

KB just closed on 10 acres of land at the latter, where KB plans to build 242 for-sale units in the first phase of a project that could include more than 2,000 homes.

Ralph Borelli, chairman of Borelli Investment Co., acts as the Flea Market owners’ development adviser and broker. He said the Flea Market land garnered about 20 offers from bidders, a sign of what he called a “frothy” market.

PulteGroup Inc. has three actively selling communities in San Jose and Fremont, but is looking for more, said spokesman Andrew Wong.

“There’s not much for people to select from,” he said. “Low interest rates have really given buyers strength in purchasing power.”


Nathan Donato-Weinstein covers commercial real estate and transportation for the Silicon Valley Business Journal.

Homes

SummerHill Homes is a nationally-recognized home builder focusing on the unique needs of the San Francisco Bay Area and Southern California. SHH has earned recognition and respect as one of the nation’s premier residential community builders. The company is renowned for developing specialized single-family detached and multi-family housing communities in established residential settings throughout California. Since its inception in 1976, SummerHill Homes’s goals have been to provide quality homes for its customers, Communities of Distinction for cities, and sound business opportunities for its partners.

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SummerHill Apartment Communities is the leader in providing quality, smart growth, multi-family rental housing and mixed-use developments located throughout the western United States. SHAC defines excellence in customer relationships, the quality of products and in every aspect of operations. Criteria for site development are highly selective to meet the company’s objectives. SHAC uses extensive market analysis to identify housing needs, and then customizes each development to achieve the highest potential.

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