Later this month, Mountain House, a 4,784-acre master planned community in Northern California’s San Joaquin County, plans to offer another 100 to 200 lots to builders. That lot offer is coming after first-quarter sales at Mountain House’s seven projects hit 88 homes, versus 17 sales in five projects during the same period a year ago. That increase is noteworthy for a community that during the depths of the recession got labeled as having the worst negative equity in house values of any community in the country.
The California Public Employees’ Retirement System (CalPERS) and Shea Homes, which respectively own and manage 2,400 acres of this property acquired from Trimark Communities in 2005, would like to bring in a fourth builder to join Shea, Meritage Homes, and Standard Pacific, which have models on site and have been constructing homes there. The builders and developer are hoping that Mountain House’s recent sales resurgence isn’t just another false dawn like last year’s Spring.
“I don’t think anyone yet has their arms completely around all of the factors” that will determine customer demand, says Geoff Le Plastrier, president of Irvine, Calif.-based LDC Advisors, a financial and real estate consultant that represents CalPERS’ interests at Mountain House. This is Le Plastrier’s fifth housing cycle, so he’s cautious about jumping to conclusions based on three months of business. However, he will say “we are optimistic, given the location of Mountain House, its prices, the builders, and the program.”
This community, which was drawn up in the mid-1990s, has completed and sold more than 3,000 homes. There’s another 8,000 lots left, of which 700 are finished; 1,100 are partially finished but haven’t been put on the market yet; and the balance is raw land, according to Frawn Morgan, LDC’s managing director of development services. Le Plastrier says the partially completed lots could be readied in six months, if builder demand warranted. And Morgan says LDC has received “a bunch” of inquiries from other builders looking to get into this community.
“The publics’ appetite [for land] is voracious,” says Le Plastrier, although neither he now Morgan would divulge the names of the interested builders.
Flexibility for future lots
Shea Homes, which has been attached to this project since the mid-2000s, controls between 80 and 90 lots in each of three villages at Mountain House. At two of the three, it offers what Adam Hieb, Shea’s vice president of sales and marketing, calls “traditional homes, with front-loaded garages and backyards,” which range from 2,100 square feet to 3,600 square feet and are priced from the mid $300s to the mid $400s. Its houses in the third community, Esplanade, are 2,500 square feet to 2,800 square feet, with alley-loaded garages and priced in the low to mid $300s.
Le Plastrier says the plan for the sections of Mountain House with finished lots is “obsolete” because it requires a certain number of homes with less-desirable alley-loads or in what he calls “auto courts,” cul de sacs of homes on smaller lots. However, “we have lot flexibility on the semi-finished and raw land,” which should help the community attract builders and buyers. “The American consumer still wants to live in a single-family house on a 5,000-square-foot lot, and that’s the sweet spot for most builders, too,” he says.
The best-selling home type at Questa, Mountain House’s latest village, is Meritage Homes’ model that’s available from 1,870 square feet to 2,350 square feet and starts under $300,000. (Both Meritage and StanPac have recently added to their lot positions at Mountain House. Barry Grant, Meritage’s division president in Northern California, did not return a call from Builder requesting comment. A spokesperson for StanPac declined to comment because that public builder is in a quiet period before releasing its latest quarterly financial results.)
Hieb tells Builder that when Mountain House was first marketed, its brochures touted “all the things it was going to be,” which included a healthy mix of retail and schools. The developer is currently in the final stages of processing the map for the community’s promised Town Center. But while two elementary schools have been built (one at a cost to CalPERS of more than $25 million), most of the retail has yet to come in. Morgan explains that supermarkets won’t open in communities until they have at least 5,000 “rooftops.” And there are only 750 high-school aged students living at Mountain House, and they are being busses to a school in Tracy, Calif., five miles away. Le Plastrier says that a 2,000-student high school with sports facilities costs around $100 million to build in California, excluding land (which Shea Mountain House, the LLC CalPERS set up for this project, is willing to donate).
Civic pride prevailed
While homeowners at Mountain House might be frustrated by the slowness of retail and commercial construction, they have shown remarkable allegiance and public spiritedness toward this community, especially during the recession when residents pitched in and maintained properties of houses that had fallen into foreclosure and were vacant. “The residents rallied to maintain the yards of houses that were abandoned, so Mountain House was never as bad as some of our other communities that were decimated by foreclosures, like those in Stockton, Lathrop, and Patterson,” observes Layne Marceau, president of Shea’s Northern California division.
Consequently, Shea never seriously considered exiting this project, into which it had already put “a lot of infrastructure in place,” says Marceau (virtually all of the lots at Questa Village are finished), “so it didn’t require a lot of additionally incremental capital” to keep it open. He acknowledges that Shea endured low absorption rates and deep price discounts, “but we were careful about not just cutting and running.”
Both Hieb and Le Plastrier believe that Mountain House’s future growth depends, in part, on CalPERS’ willingness to invest in further development. That willingness is likely to hinge on the extent that this community benefits residually from the economic strength of nearby Silicon Valley. “We are offering a traditional, affordable option” to living within driving distance of those jobs, Hieb says, “that still has a small-town feel.”
The developers’ have reached out to homeowners and prospects about the kinds of houses they want to live in, which led to StanPac recently adding the community’s first single-story house plan. Hieb suggests that Mountain House’s next twist could be multigenerational living options, something that Shea has been promoting in its house designs in recent years.
John Caulfield is senior editor for Builder magazine.