Developer Keen on Sacramento Housing Market Despite Slump

David Ragland has bought land and built houses for three different national home builders in Sacramento for 20 years. Now he’s readying for a fourth, the newest corporate home builder to set its sights on California’s capital region.

That’s Los Angeles-based Pardee Homes. Beginning Saturday, it will compete with 86 home builders already working the Sacramento housing market.

Pardee, a familiar name across the decades of growth that built Southern California and Las Vegas, is about to open eight model homes in Natomas.

The houses mark the first of several thousand homes the firm hopes to build in the Valley as Sacramento and cities along Highway 99 and Interstate 5 see their populations double or more by 2050.

Pardee’s debut comes at a difficult time in the Central California housing market cycle for new home builders. The firm launched its division in the boom, but its first project arrives during a serious sales slump.

The models’ doors are opening amid price cutting by other home builders, excess inventory of both new and existing homes for sale, and a drastic slowdown in building activity.

But Pardee, which weathered the far worse 1990s Southern California housing slowdown, is gambling that strategic land buys - even at boom prices - will carry advantages.

Meanwhile, local privately owned home builders who bought land at low 1990s prices have been gaining market share this year - even amid California home loan woes - with an ability to discount.

Ragland, a Pardee vice president who oversees the Sacramento division, said the builder targeted the region in particular for its supply of land and long-term economic prospects.

“Sacramento has proven to be a consistent home-building market in ups and downs,” he said.

Pardee is making Sacramento its fifth regional division in a western U.S. lineup that includes Los Angeles-Ventura, San Diego, Inland Empire and Las Vegas.

From 2005 through the first three months of 2007, the home builder sold 3,000 single-family detached houses in California, said Robert D. Martinez, director of research at San Diego-based MarketPointe Realty Advisors.

That’s 3.4 percent of total detached home sales in Los Angeles, San Diego, Orange County, Riverside, San Bernardino and Ventura. Publicly traded Lennar Corp. has a 9 percent share. KB Home has 8 percent.

Nearly half of Pardee’s sales are in the growing western suburbs of Riverside County, Martinez said.

He said Pardee reported a 29 percent drop in its sales as Southern California home prices fell in 2005-2006, but still outperformed the region. Total sales across Southern California dropped 40 percent during that period.

A subsidiary of timber giant Weyerhaeuser Co., Pardee hired Ragland at the height of the housing boom in 2004 to launch a Sacramento division. It has since invested more than $150 million on land and other startup costs in Natomas, Rancho Cordova and Stockton, he said.

“It’s kind of a feel-good story,” said Greg Gross, who tracks Northern California home builders as a director for Houston-based Metrostudy.

“As slow as things are, someone is taking the opportunity to enter this market. They’re going to be a competitive builder.”

Ragland concedes that the company faces a formidable challenge as the new home and mortgage loan markets slump. But he thinks a Natomas location at Gateway Park Boulevard and Terracina Drive will be an early advantage.

“My experience in Sacramento says the farther you are from job centers, the worse off you’ll be,” he said.

Pardee’s 120-acre Natomas community - about 660 single-family houses and 260 apartments and condos - is 5 miles from downtown Sacramento. The company plans another 1,100 houses in the Sunrise Douglas area.

The first Natomas offerings start in the $300,000s and are aimed at first-time home California mortgage applicants as well as at move-up buyers.

The firm also is looking at 55-and-up adult communities and big neighborhoods with home lots it could sell to other builders.

Pardee President and Chief Executive Officer Michael McGee said the company is studying the Highway 99 and I-5 corridors in the Valley. Growth experts say population there will more than double to 8 million by 2050.

The Sacramento opening represents Pardee’s third attempt to stake its claim to a Northern California housing market. Its first small venture into Santa Clara County in the late 1970s proved unsatisfactory, McGee said.

Its second never got past Livermore voters.

In November 2005 they rejected a Pardee proposal to expand the city’s urban growth boundary to build 2,450 new solar-powered houses. Pardee spent $3 million on the campaign and got only 28 percent of the vote.

“Pardee, despite spending a lot of money, didn’t do its homework and ran into the strong convictions of Livermore voters,” said Tom Steinbach, executive director of the San Francisco-based Greenbelt Alliance.

The group tries to preserve open space by keeping growth in already developed areas. It helped lead opposition to Pardee’s proposal.

Some analysts say the firm is at the forefront of green building. In 2005 it was the state’s first builder to earn one of Governor Arnold Schwarzenegger’s Environmental and Economic Leadership Awards.

SOURCE: Sacramento Bee