Wednesday, March 12, 2008

Daily Breeze: Developers put Hawthorne housing construction on hold

I got a wonderful heads-up from a regular blog reader (I get the greatest tips from my blog readers!) about this March 10, 2008 Daily Breeze article by Sandy Mazza (link will probably expire). Those of you who aren't particularly thrilled with all the high-density housing projects in the area will appreciate it.

The slumping real estate market has brought Hawthorne's housing boom to a standstill,
interrupting plans for about 800 new luxury homes that were set to go up for sale
this year.

Three high-density housing developments have been derailed since last year, when the
nationwide subprime lending crisis spurred flocks of foreclosures and a decrease in
the value of homes.

Former Hawthorne Mayor Guy Hocker has canceled his plans to build about 100
single-family homes at the former Robert F. Kennedy Medical Center near 116th Street
and Grevillea Avenue.

Hocker, with a partner, bought the property about a year ago for $15 million. He
received City Council approval to build the Prestige Villas in September, but, months
later, he abandoned the project because of upheaval in the housing market. Hocker
said last week that he's trying to sell the eight-acre parcel.

At the newly built gated community called Threesixty at The South Bay, the developer
has stopped the sales of its 625 luxury condominiums on the site of the annexed
portion of the Los Angeles Air Force Base on El Segundo Boulevard.

On Monday, the development's Web site stated: "Sales opportunities are temporarily
unavailable while we give the market time to improve."

The homes went on the market in October at prices from the mid-$600,000s to nearly $1
million. But all sales were canceled, and selling stopped this year.

Mike McMillan, project manager for the developer William Lyons Homes, said the
company would not answer questions about its decision.  "As it relates to the
Three-sixty community, we're not really in a position to comment," he said.

A third planned housing development has also changed direction. South Bay Ford owner
Gary Premeaux said he's abandoned plans to build 164 homes at the former dealership
near Hawthorne Boulevard and Rosecrans Avenue.Premeaux said he will continue to
operate a fleet service center on the property until the market improves.  "I spent a
ton of money to get the entitlements approved, which I got," he said. "The subprime
housing problem is a cloud over everyone that's going to be around another 12
months."  Premeaux said his proposed project would have garnered about $1 million
each year in city taxes, because it's in a redevelopment area.

City Manager Jag Pathirana said the loss of these housing developments will cause a
budget shortfall for the city.  "It is unfortunate that these projects have been
temporarily halted, but this is to be expected in the current housing market,"
Pathirana said, indicating that he expects the developments to move forward when the
market improves.  "The temporary stalling of the projects will hurt the city
financially. We were anticipating the property taxes and other ancillary
revenues from those developments."

The Office of Federal Housing Enterprise Oversight states that the downward trend of
the housing market in 2007 represented the longest sustained decline since 1991.

The housing market reflects an overall economic slowing nationwide, according to the
National Association for Business Economics, which predicted that the economy will
begin to improve in the second half of this year.

However, some projects in Hawthorne are moving forward. Fusion at South Bay, a
project comprising 280 condominiums near Aviation Boulevard and Marine Avenue, is
nearly sold out, according to its advertisements. Representatives from Centex Homes,
the project's developer, did not return phone calls and e-mails last week regarding
the project. A banner outside the development lists home prices beginning at
$300,000, while they initially were advertised at $520,000.

Meanwhile, some have capitalized on the decline in the cost of housing and a drop in
mortgage rates.

Jeff Lee, owner of Lee Homes, said his planned Central Park development is going
full-speed ahead. The project, which should hit the market at the end of this year,
will bring 176 detached single-family homes near the corner of 120th Street and Van
Ness Avenue. "We've got 1,000 people on our interest list," Lee said of the homes
that will range from mid-$500,000s to mid-$600,000s. "We're in the housing business.
Yes, it's tough. But all of our homes will be covered by better loans at lower
interest rates. We're happy."

In the years leading up to this mess (2005, 2006) I can't recall a single industry observer being quoted as saying that things were going to take a tumble. Look how long it's taken any industry observers to admit that things are not so good. Now they're acting like it's just a little temporary rain and it'll all blow over and sunny weather is just around the corner! They still aren't facing up to the possibility that this debacle could really drag us down into the pits of hell.

If I am going to make one prediction, it'll be this - there won't be any kind of lasting and sustainable recovery until these industry experts are pouring blood and tears all over the newspapers and agonizing over how their businesses have been destroyed or nearly so, and how there is no way in hell they see any recovery on the horizon.

And as for that "interest list" that the Lee Homes builder has, well 360 at South Bay had a good interest list too. Did that interest list translate into committed buyers? Or did the people on this interest list have a different sort of interest, if you get my drift from the picture below?

And why is it that these builders who build these bloated mega-developments and disrupt the lives of the local residents are not obligated to comment on what they plan to do with the properties, which are now eyesores?


Blogger wannabuy said...


Nice find. I'm not a fan of high density housing either. However, if I take a step back, what my coworkers will 'hear' is that housing in the area won't get cheaper. We know that's not true... But every article like this scares more away.

Oh, I loved this quote from the article: However, some projects in Hawthorne are moving forward. Fusion at South Bay, a project comprising 280 condominiums near Aviation Boulevard and Marine Avenue, is nearly sold out, according to its advertisements. Representatives from Centex Homes, the project's developer, did not return phone calls and e-mails last week regarding the project.

A banner outside the development lists home prices beginning at $300,000, while they initially were advertised at $520,000.

Are these less desirable/smaller units? Or do we have FB's underwater $220k in the south bay?

Got Popcorn?

9:44 AM, March 13, 2008  
Blogger Nancy said...

It's just crappy how this market became artificially high because of speculation, and now people are forced out by higher rent & mortgage prices while developers let everything sit there and rot until they determine they can get the most $ from selling these condos later on...

3:38 PM, March 13, 2008  
Blogger bearmaster said...

Neil, according to one comment in this posting:

Something's up at 360 South Bay

Fusion had intended to price the units back by the railroad tracks at a lower price all along. But I am skeptical as to what that lower price was originally going to be.

When the whole Fusion project was coming into being several years ago, the original signage said "from the $400,000s". That I definitely remember.

Thanks to the bubble, the low-end price got driven up to about the $520,000s.

If Centex originally planned $400,000 and sold the undesirable units for $379,000, the company probably made out all right, but not spectacularly so.

Notice at this link that no information was ever filled in for residence H. So I'm sort of wondering if Centex decided not to build it and instead put in cheaper stuff by the railroad tracks. It's hard to make out was residence H is, a roomy place with no garage..?

3:54 PM, March 13, 2008  
Blogger bearmaster said...

I hear you Nancy. I remember news stories barely 2 years ago about how the L.A. City Council wanted to put a moratorium on apartment-condo conversions in the city of L.A. because the stock of affordable apartment housing was getting depleted. It's been a problem everywhere, not just L.A.

Well, maybe there is such a thing as karma. Nobody bailed out the renters who got tossed out with no place to go, now for the love of God please let's sit back and not bail out any builders who got in over their heads. Let's allow the market to impart its wisdom.

3:58 PM, March 13, 2008  
Blogger Chris said...

I looked at fusion way back when they first opened. I recall prices for the lowest level unit being between 329 and 379 (most likely 379). But that was for phase 1 which i couldn't even get a chance at despite signing up for the interest list day one. Of course I couldn't afford that at the time, I was just curious.

Now what was funny was that I went to one or two of the sales and got in the door once (passed because again I couldn't afford it).

But the time I got in, they were selling the models they planned to build. Their words were something like: "We're selling out every phase we won't need models"

Over the course of a year (~november 2005-2006) the price went from 379 to 529 and things stopped selling.

Somehow I missed out when they slashed the prices back down to 379, but it's probably for the best now that I know how bad the HOA is.

1:17 PM, April 10, 2008  

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