Co-Author: Ken Perlman, Principal
The top 50 master-planned communities (MPCs) in the country accounted for 5.4% of 2013 new home sales. There were 23,463 new home sales in the top 50 master-planned communities in the country in 2013—a 12% increase over 2012.
Everything is bigger in Texas, including its master-planned communities, and 2013 was no exception. This year’s list of top 50 masterplans included 17 from the state of Texas (one-third of all entries) and 13 from Houston alone. There were nine Florida masterplans in the top 50 in 2013, seven California communities, four Phoenix communities, and four Washington, DC masterplans. And while Las Vegas was represented by just three masterplans, all of them were in the nation’s top 20.
Newland Communities has five of the nation’s top 50 in 2013, the most of any individual developer. The San Diego-based developer’s masterplans were located in four different metro areas, easily making them the most geographically diversified developer in the country. Houston-based Johnson Development was represented by four masterplans in the top 50, and Sunrise, FL-based GL Homes and Shea Homes in Walnut, CA both had three.
Waning lot supplies and development delays contributed to lower sales in some communities. 2013 sales were lower than 2012 volume in 13 of the top 50 master-planned communities, or 26% of the communities. Reduced sales were most common in Houston, Phoenix, Las Vegas, and Washington, DC, while most Florida and Southern California MPCs enjoyed increased sales. Our conversations with the community developers revealed several factors that slowed new home sales:
- Some communities are winding down. Examples of former “hot” master-planned communities that are nearly out of lots include Telfair on Houston’s southwest side, Otay Ranch on San Diego’s south side, and Power Ranch in Phoenix. New home sales declined by 62-75% in these communities in 2013, and they no longer appear in our top 50 ranking. Several Northern California communities similarly dropped from the top 50 this year.
- Delayed lot deliveries slowed builders’ sales. The spike in demand for finished lots in late 2012 and early 2013 left developers scrambling to deliver. Bottlenecks emerged in planning and approval processes, as engineers and jurisdiction offices were overwhelmed and labor shortages slowed site work. Some local developers still lack development financing, which slowed their progress. Without enough lots to build on, builders’ sales declined. Brambleton in Washington, DC and The Woodlands in Houston both report lower 2013 home sales, yet demand remains strong.
- Builders intentionally limited sales and raised prices in the first half of 2013. Many California, Southwest, Florida, and Texas builders were restricting sales and bumping prices regularly in the first half of 2013. In some cases, the builders were rationing lots they couldn’t replace.
- New home sales cooled in the second half of 2013. Our proprietary builder survey has revealed slowing sales and weaker pricing beyond seasonal expectations since September. The impact of the government shutdown in October was especially significant in the Northeast corridor from Baltimore to Virginia Beach. However, no region was immune to the pause in the housing market as buyers assessed the impacts of higher rates and home prices.
Many new master-planned communities join our top 50 ranking. Each of the master-planned communities in the top ten have been in our ranking before; however, over 20% of our top 50 communities are new to the ranking this year. We expect that some of these new communities will rise in the ranking as they gain momentum and older communities reach completion. Next year’s master-planned community ranking will surely bring a new round of conclusions and perhaps some surprises.
Tracking builder activity can yield timely insights. We identified a small but growing trend of MPC developers who do not track the builders’ activity in their community. As the housing recovery progresses, developers who are not tracking builders’ sales and inventory will not have a good read on when to develop more lots. In addition, these developers are more likely to miss the early signs of weakening home prices when sales slow and inventory rises.