Homebuilder Lennar plans for big growth after riding out Valley slump

The Fresno BeeMay 30, 2014 

Mason Francisco Avendano builds the rock facade of a new Lennar home under construction at Quail Lake, Thursday May 23, 2014.

JOHN WALKER — Fresno Bee Staff Photo Buy Photo

When regional and national homebuilders pulled out of the central San Joaquin Valley during the depth of the housing bust, Lennar Homes was one of the few that held on.

The Miami-based company continued to build in the Valley, but scaled back construction as home sales and values plunged and foreclosures surged. Then the builder crafted a plan for the recovery, which included buying land in half-finished developments, and waited for the economy to improve.

"We tried to look out as far ahead as we could and plan, hoping the market was going to turn around," said Mike Miller, Fresno's division president. "We assembled our land possessions quite well, so when the market sparked, or started to turn, it enabled us to run with it as it took off."

The plan worked. Now, Lennar — the Valley's largest builder — is expanding its footprint with 18 communities in Fresno and Tulare counties and Bakersfield.

That's the same number of neighborhoods the company built in the Valley during the peak of the housing market and more than four times what it built at the lowest point of the downturn.

The number of houses built, however, pales in comparison. This year, the company plans to build 741 homes compared to 1,175 in 2006.

Builders still face some challenges, Miller said, such as the increasing cost of doing business and low sale prices.

The market is not back yet, but it's fighting to come back, Miller said.

Lennar entered the Valley housing market in July 2002 when it acquired Fresno's Cambridge Homes, then one of the area's largest homebuilding firms. Lennar, a publicly traded company, kept most of Cambridge's employees, including Miller.

The deal allowed Cambridge access to Lennar's hefty balance sheet and the benefits that come with being part of a national company that builds in 18 states — discounts on material, labor, insurance premiums and more.

The "combination of having the local connection and the financial strength of the national company in a really bad situation was the best equation to help survive" the downturn, Miller said.

Other companies such as Dunmore Homes of Roseville and Woodside Homes of Salt Lake City filed for bankruptcy or reorganized during the recession. National builder Beazer Homes of Atlanta left the area in 2008 and McMillin Homes pulled out of Fresno in 2010. But Lennar grew.

In August 2010, the Fresno office took over the company's Bakersfield operations and now is building four communities there. And since 2011, the builder has quickly unveiled one new neighborhood after another from Tulare to Clovis.

The goal: to cover as many market niches as it can and to do it quickly.

Lennar has consistently been one of the largest homebuilders in the Valley because the company is about volume, said John Mulville, vice president, consulting at Real Estate Economics, an Irvine-based real estate consulting company.

"They're volume driven," Mulville said. "They want to report to Wall Street."

That means Lennar, and other public companies like D.R. Horton and KB Homes, have to feed production by acquiring land where they can find it and build, he said.

In late 2011, Lennar picked up 47 lots in an abandoned neighborhood at Shaw and Locan avenues in Clovis. It also bought the remaining sites in the Blossom Hill subdivision in southeast Fresno and Autumnwood Ranch in northwest Fresno and tracts in the South Valley.

Now, Lennar is building the remaining 99 houses in Quail Lake, a master-planned community in Clovis, and 56 homes in Stonehaven, an existing neighborhood in Sanger.

The company is a spec builder, which means it builds houses before identifying a buyer. Most local builders sell the lot to a buyer, then build the house.

Buying a spec home means that families get into a home quickly rather than waiting six months before it is finished, Miller said.

"People don't want to wait," Miller said. "They want instant gratification so that's been helpful" during these times.

Then there's Lennar's home designs. The company's Next Generation Home, introduced in 2011, has quickly become popular with multigenerational families.

The Next Gen has a private suite that includes a bedroom, kitchenette and full bathroom. The suite has a separate front entrance and one into the main house.

Lennar has designed five Next Gen homes, including one with two bedrooms because of the popularity of the model, Miller said. The Next Gen makes up about 10% of Lennar's sales.

Ross Becker and his wife, Francie, bought the 2,257-square-foot Versatillion, a Next Gen home, in Visalia at the end of last year.

"We wanted a new house with a little bit more square footage and a very different floor plan," Becker said.

Environmentally friendly features like low-flow faucets and energy-saving appliances found in Lennar homes were also important for the couple, whose previous house was a 36-year-old power guzzler.

The couple didn't set out to buy a Lennar home. They stumbled into a Lennar development while looking at other homes built by local developers.

"I walked in and I looked at this house and I thought 'This is exactly what we want in terms of size and layout,' " Becker said. "We were particularly drawn to the Versatillion's three-room private suite built into the floor plan. We knew that would be good with over-the-weekend guests."

The reporter can be reached at (559) 441-6495, blee@fresnobee.com or @bonhialee on Twitter.

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