Abstract:
Who knows how deep the current downturn in home sales will go? The crystal ball is cloudy for everyone. But one thing is clear: many Giants are rushing into high-density infill development — including high-rise condo buildings — just as housing demand is faltering, and that's a dangerous move.
Publication Date:
Fri, 2006-03-31 18:00
Article Image:
Who knows how deep the current downturn in home sales will go? The crystal ball is cloudy for everyone. But one thing is clear: many Giants are rushing into high-density infill development — including high-rise condo buildings — just as housing demand is faltering, and that's a dangerous move.
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| Masters Of The Universe (Giants 6-31), which includes majority of publicly-held home builders, have a big lead in closing high-rise condos, but projects under construction indicate Supernovas (Giants 1-5) will soon find traction in this market segment. |
High-rise condos have much in common with rental apartments, including an easy propensity for over-building. When there's demand that everyone can see, too many builders may rush to meet it, and two years later there's a surge of inventory. A lot can change during the 18 months to two years it takes to build a high-rise.
Unlike a suburban subdivision, where a builder can slow down — or even stop construction — a condo tower is an all-or-nothing proposition: "Once you get past the foundation, and start putting bricks in the air, you're going the whole way," admits Toll Brothers chairman Bob Toll, "whether people are canceling contracts or not. You can't stop a high-rise."
The demographics of housing demand indicate an upswing in urban projects for at least the next ten years, risk or no risk.
Top 10 Townhouse & Low-Rise Condo Leaders
| 2006 Rank | Builder | City | ST | Townhouse/Condo Closings |
| 1 | Pulte Homes, Inc. * | Bloomfield Hills | MI | 12,776 |
| 2 | D.R. Horton, Inc. | Ft. Worth | TX | 8,735 |
| 3 | Lennar Corporation* | Miami | FL | 8,243 |
| 4 | Centex Corporation | Dallas | TX | 7,515 |
| 8 | NVR, Inc. * | Reston | VA | 4,136 |
| 44 | Pasquinelli, Etal. | Burr Ridge | IL | 3,277 |
| 7 | Hovnanian Enterprises, Inc. | Red Bank | NJ | 3,214 |
| 35 | Tarragon Corporation | New York | NY | 3,081 |
| 12 | Standard Pacific Corp. | Irvine | CA | 2,742 |
| 61 | Epcon Communities Franchising, Inc. | Dublin | Oh | 2,677 |
| * Estimated Source: Professional Builder, 2006 SUPERNOVAS (GIANTS 1–5) already lead in townhouse and low-rise condo closings, with the notable absence of No.5 KB Home. PB (so far) has no statistical category for mid-rise. Low-rise goes up to four stories. Five stories or more are high-rises. |
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Top 10 High-Rise For-Sale Builders
| 2005 Rank | Builder | City | 2005 High-Rise Sale Closes | % Change Over 2004 | ||||||||
| 22 | MCZ Development | Chicago, IL | 3,670 | -7.8% | ||||||||
| 53 | Wood Partners | Marietta, GA | 671 | 148.5% | ||||||||
| 3 | Lennar Corporation* | Miami, FL | 600 | - | ||||||||
| 17 | WCI Communities, Inc | Bonita Springs, FL | 563 | 6.0% | ||||||||
| 18 | Taylor Woodrow, Inc. | Bradenton, FL | 531 | 5.4% | ||||||||
| 89 | Magellan Development Group | Chicago, IL | 410 | 71.5% | ||||||||
| 30 | JPI | Irving, TX | 330 | 247.4% | ||||||||
| 268 | The IDI Group Companies | Arlington, VA | 278 | -20.1% | ||||||||
| 136 | The Enterprise Companies | Chicago, IL | 230 | -39.3% | ||||||||
| 128 | The Cornerstone Group Coral | Gables, FL | 181 | - | ||||||||
| Source: Professional Builder, 2006 CHICAGO-BASED MCZ DEVELOPMENT is still the leader in high-rise closings. MCZ peaked at No. 21 in rankings last year, but dropped a spot this year. Note that Supernova Lennar Corp. hit the top 10 for the first time with 600 closings in a Miami joint venture.
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