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Specializing in servicing residential buyers and sellers in the San Francisco South Bay area, Palo Alto, Sunnyvale, Cupertino, Mountain View, Los Altos, Santa Clara, Menlo Park, San Carlos, Campbell, Milpitas, San Jose, and real estate investors nationwide

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This article was published on: 2/7/2006

Condo sales up as homes grow scarce
By Michele Chandler

Mercury News

The new, affordable single-family house is an endangered species in the Bay Area -- increasingly, townhomes and condos are instead taking center stage.

Some developers say it's a challenge to offer homes that don't share walls with neighbors, as building costs rise and the supply of available land dwindles.

"Single-family detached is a dying breed,'' said Mike Forsum, western region president for developer Taylor Woodrow, which specializes in building homes in the Bay Area that typically have sold for between $500,000 and $900,000. "It's just harder and harder for us to find the opportunities.''

About half of all new homes built by Taylor Woodrow in 2004 were stand-alone single-family houses, Forsum said. But he expects the percentage will fall to about 30 percent this year, because the company has more townhome-style developments in the works.

Traditional single-family homes with big yards and garages long have been a precious commodity in Silicon Valley, where a large base of high-wage workers competes for scarce acreage. As land prices have marched upward here during the recent real estate boom, developers increasingly have looked at the new single-family home as a luxury to build.

"You do find boutique builders who do the more costly and higher-priced places. But if everyone tries to build mansions, there is a limited market there,'' said Marty Keller, director of construction management with First Community Housing of San Jose, a non-profit developer of apartments. "You need to serve all segments of the market, and the middle-income and lower segment is the largest portion.'' That means more townhomes and condos.

The trend is evident in the rising number of condos and townhomes in Santa Clara County. The number of existing condos rose from 62,253 in 2000 to 68,228 in 2005, according to the county assessor's office. Fueling the growth: less land on which to build.

In Santa Clara County, the median price of a resale home was $701,000 in January, up nearly 17 percent from a year before, according to DataQuick Information Services. In January, the median price of a Santa Clara County resale condo was $480,000.

Rising costs

About 14 percent of California households could afford a median-priced home in November, compared with 19 percent for the same period a year before, according to the California Association of Realtors.

Several factors are contributing to the waning excitement among some builders over affordable, single-family homes. Prices of lumber, plywood and other building materials have skyrocketed recently because of demand in the wake of hurricane damage along the Gulf Coast, said Carol Meyer, chairman of the board for developer Greenbriar Homes Communities. Even growth in China siphons away resources. ``It's an international market for building materials,'' she said.

Still, land costs remain high on the list. An acre of prime land in downtown San Jose worth between $3 million and $4 million today probably cost about half that two years ago, according to Joseph Perkins, chief executive officer of the California Homebuilders Association.

To recoup their costs, home builders sometimes construct very high-end, pricey homes in expensive communities, or build clusters of less costly attached townhomes or condos.

In recent months, some builders have taken over former commercial properties, planning to construct housing on the site. Last year, Fung Lum restaurant in Campbell and Lou's Village restaurant in San Jose both closed to make way for upscale condos.

Meyer said Greenbriar builds about 200 homes each year and has communities in Dublin, Livermore and Pleasanton, all fairly far from the Bay Area's core. Nearly all of Greenbriar's homes sold to general buyers are single-family houses selling for $700,000 and up. But, watching the trends, the company is exploring building more townhomes.

Transit hub housing

Cities like San Jose want more housing constructed near employers and public transit hubs. During the next three to five years, about 3,800 condos are expected to be completed in the city's downtown redevelopment area, said Weis, of the San Jose Redevelopment Agency.

"The world is recognizing you can't keep building 1950s-style ranch houses because we don't have the land anymore,'' said David Vossbrink, spokesman for San Jose Mayor Ron Gonzales. "I don't think San Jose is any different. As all cities mature and grapple with land becoming more scarce, there's still a desire to build housing in a community.''

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