Responding to a changing demand
Comstock's Business, July 2004

"Responding to a Changing Demand – Today’s homebuyers have different ideas on what constitutes the best in modern living"

While traditional three-bedroom/two-bath starters, first and second move-ups and executive homes are still in demand, many buyers new to the market have different visions of what constitutes the best in modern living. Many of these buyers come to the Capital Region from high-priced urban areas like San Francisco, and they bring their love of urban living with them.

Other buyers, many of whom have recently emptied their nests or are single, are foregoing expansive homes in favor of smaller, easier-to-maintain structures with the amenities they have grown accustomed to.

The change in demand has led to a change in supply. Builders now produce a variety of homes that include high-end infill projects, high-density condos and cluster homes. Although lot sizes are shrinking, house sizes are growing, mostly upward. Developers are also reaching out to the region’s most traditional buyer — families with young children — by building communities that forego golf courses for more family-friendly options like trail-laden open space, clubhouses and aquatic centers.

Here is a closer look at a few of these trends as described by some of the region’s builders and analysts.

URBAN INFILL
Infill is the replacement of built-out or decaying structures, such as old warehouses or commercial buildings, with renovated housing that utilizes the existing infrastructure. Bob Holmes, vice president of residential developer for Regis Homes of Northern California, says that while the market for this kind of home is fairly new to the region, it has been a part of other modern urban settings for a long time.

“Most local developers were focused on standard ‘green field’ developments for years,” Holmes says. “But there is also this huge market among singles, couples with dual incomes and no children and empty nesters who are not really interested in dealing with yards and the rest of the typical suburban lifestyle. Builders are now building to that demand.”

Resulting developments include Regis’ Metro Place at Washington Square, located in West Sacramento, which features 10 loft units in addition to 44 high-density cluster homes. Other loft developments already in place or in the planning stages include Loftworks’ 18-unit East End Lofts project at 16th and J Streets in downtown Sacramento and a pending 21-unit site just one block over at 16th and K Streets. Regis is also planning the 109-unit Capitol Lofts development at 11th and R Streets. New York-style lofts such as these near-urban settings and typically have high ceilings, lots of open space and up to three bedrooms, all in 650 to 3,000 square feet of living space.

Holmes says that, surprisingly enough, higher home prices have enabled builders to develop these homes in true loft fashion, meaning that they include amenities, such as extensive windows and polished concrete flooring, that were previously cost-prohibitive to builders. While this kind of infill has its merits, it also has its challenges.

“Infill areas have cost factors you don’t deal with in other areas.” Holmes says. “There are entitlement risks that invariably slow progress on a project, which doesn’t usually happen with a master-planned community. You also typically end up fixing infrastructure that has been there for years. In West Sacramento we ended up fixing water systems for the city, which is unusual. It is just a lot more expensive to replace something than it is to build it new.”

HIGH-DENSITY CLUSTERS
High-density clusters (developments in which a lot of houses are packed together onto small lots) are often in urban areas and usually lack front and back yards, which have been replaced by common-area courtyards and have marginal-at-best space between units. Washington Place and similar communities in Roseville, Natomas, Folsom and Lincoln fit into this category.

---Rich Ehisen