Newhall Land & Farming Co. already has 30,000 lots slated for development in and around Valencia.
So why would it team up with Kaufman & Broad Home Corp. to develop a 5,000-home community in Palmdale, where home prices generally have been depressed?
The answer lies in the explosive growth expected in L.A. County where the Southern California Association of Governments expects another 3 million people to be living by 2020.
"It may seem like we have a wide variety of (lots available) out here, but look at what the demand is, and you realize we've got an impending crisis on our hands," said Marlee Lauffer, vice president of community relations for Newhall Land.
According to SCAG estimates, L.A. County will need an additional 185,000 housing units, or 37,000 a year through 2004, to meet that demand.
But Newhall's total inventory of 30,000 lots property the developer hopes to build out over the next 20 years or so wouldn't even satisfy a year's worth of countywide demand.
Meanwhile, home prices are increasing in Valencia. With the planned Palmdale community, dubbed City Ranch, the two development companies want to cash in on first-time homebuyers who are being priced out of the Valencia market where the median resale price of a single-family home in August was $245,000. That was 16.7 percent more than in the like month a year earlier.
Despite its decision to pursue the City Ranch project, Newhall Land is by no means ready to abandon the booming real estate market in Valencia. In the years ahead, it plans to develop its 9,000 remaining lots there and to build 21,000 additional housing units in its nearby Newhall Ranch project, a planned community of 70,000 homes targeted for an agricultural area on the Ventura County border.
Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said Newhall Land's decision to build yet another planned community "may seem crazy, but it's not crazy at all."
He said Southern California faces a serious housing crunch that could make it more difficult for the area to attract and retain a workforce to meet the needs of employers.
"If you want entry-level housing in Southern California, you have to go east to Riverside or San Bernardino, or north into the Antelope Valley," said Kyser. "We have a homebuilding deficit, and if we don't get busy, we are definitely going to be hurt in our competitiveness."
Newhall Land recently announced that it had formed the joint venture with a subsidiary of Kaufman & Broad to develop the already approved master-planned City Ranch community in Palmdale.
As part of the transaction, Newhall Land acquired a 50.1 percent interest in the property owned by Kaufman & Broad and will act as master developer, with day-to-day responsibility for the project.
Located two miles west of the Antelope Valley (14) Freeway and about 26 miles east of Valencia, City Ranch will feature 4,200 single-family homes, 300 apartment units, and 260,000 square feet of commercial development. Also planned are schools, a lake, parks, riding and hiking trails, and a public golf course.
The first lots are expected to be available to homebuyers late next year. If current market trends continue, the project is expected to be sold out in about eight years.
Lauffer said the rolling hills of City Ranch and its status as a planned community will help distinguish it from competing projects in the Antelope Valley.
Thomas Lee, Newhall Land's chairman and chief executive, said City Ranch makes sense because the development company wants to diversify its income stream and asset base into a housing market that will not overshadow its work in and around Valencia.
"We continue to focus on the development of Valencia, where activity in all business segments commercial, industrial and residential remains strong," said Lee.
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