San Diego Housing Bubble News and Analysis

limits

Yes, there are general limits as to what they can do. The type of change you describe is drastic and would require a re-review of the plans (changing from SFR to condos). There is already a specific density requirement for the project and as long as they stay within those density requirements, they can make changes, but SFRs to condos is a major change.

For builders like 4S Ranch and Del Sur, they are already almost finished. They do not have any new plans at the tentative map stage (which is where they could negotiate changing SFRs to condos). The only possible change they could do (which is what some builders have done) is build smaller and more affordable houses in order to meet demand at that price range. Still, changing in midstream like this requires a lot out of a builder, their construction crews, and design.

Changing floor plans that are offered are things the builders can do relatively easily, most sales contracts will state that the builder has the right to change things like that.

But going from SFR's to Condo's requires zoning and/or permit/govt approvals, which are much harder to come by. In general, when a builder does a "planned community" they are required to stick to their plan without MAJOR overhauls like changing from SFRs to condos. If a piece of land is not zoned for multi family dwellings, the buillder cannot simply change his/her mind and put them up... it's a massive process to make that change.

Yes they can change. It happened near me in the last bust. They were building a tract of 3000sf~4000sf Mcmansion (those qualified as mansions in the late 80s). When the bust hit and those monsters stopped selling they started building 900sf~1600sf crackerboxes. There were blocks where the first few homes were big monsters and then the rest were little tiny dollhouses. Of course there were pissed off homeowners and lawsuits, but that did not stop the builder. This was in a master planned community with strict HOAs.

They also built a big condo complex in the same area and sales were so bad that after a year they ended up turning it into an apartment complex. Angry homeowners nearly strung up the city council but it did not change the outcome.

So long as the number of expected residents won't increase, the developer can probably make the changes.
However, a career ago I was somewhat involved in development from the government side. When times were bad, many developers wanted to change plans they had in place to build higher density stuff that now wasn't so profitable. City planners generally said no to those requests, since higher density housing- where there is infrastructure in place to support it- is thought to be good thing.

golfproz, would you mind sharing which part of SD this is?
Thanks

Typically builders can make changes to plans that are in "substantial conformance" with the approved plans. These type of changes would include slightly larger/smaller floor plans (usually less than 10%), different gables, porches, etc. Basically, any changes that if a council member who approved the plans drove by the development he wouldn't be able to notice the changes. If the builder chooses to make changes beyond this scope, the Planning Department would require the builder to return to public hearing (Planning Commission, City Council, etc.) and have the changes heard in front of the commissioners.

If a builder desired to change land use entirely, such as single family to multi-family, etc, that would require a Master Plan Amendment that would also go back to hearing. This would be very costly and time consuming, but entirely possible. However, you would have the opportunity to attend the hearing and make your complaints heard or contact your local council member and let them know your thoughts.

The Master Plan is a legally approved document and would require a legal hearing and new approval for any changes.

That was not in SD. Back then I lived with the folks in the IE. The development was the Moreno Valley Ranch. It had a 27 hole Pete Dye course and a bazillion homes, a big lake and community clubhouse etc. The tract with the big houses right next to the little ones was right beside the lake. All those folkes bought big homes on the lake with docks in the back yard for their teeny weenie sail boats. Those homes were costing upwards of 360K (in 1990!). It was sad, at the time the development was attracting lots of fairly well off retirees that were cashing out from LA and the OC. They were buying big homes and decking them out will pools and all the toys. Then the slump hit and sales stopped. The developer sat on them for about a year then cut the price from 360K to 180K! After they dumped the last of the big houses the remaining lots sat empty for about a year and then the started building the small homes. The folks still live there and it's actually still a fairly nice area. In the last 5 or 6 years they build another gazillion homes around there and the prices had reached the stratosphere. I expect to see a repeat of the early 90s. There are builders still trying to sell 750K tract homes there. And they are grading a HUGE development for "executive homes" that are supposedly going to be around a million dollars. HAHAHAHA is all I have to say about that. I'de put money on that development being a large graded wasteland for the next 10 years. Oh wait, they changed the name of that part of the city. It's now going by the rather swanky name of Rancho Bellago. That's gotta make it easier to drop a mill now that it not MoVal.

The first move they usually make is to redo the specs, cut costs in conjuntion with price cuts. I've seen it in past cycles and last week I visited development that had opened and had abysmal sales initially and was cutting specs and prices. It doesn't require any plan or permit changes because all of the changes are on the inside. The builder I visited is dropping everything it was including(granite, stainless steel, nice fixtures, wiring, nice cabinet choicess). They make them as cheap as they can and slash the hell out of the price in order to go after a different client pool and it seems to be working for them. Another strategy that Lennar took was to include every option imaginable for free. It's still all smoke and mirrors, One way they cut prices 100k but by cutting the specs the real cut is only 50k, the other way it looks like you get 100k in freebies but it only costs them 50K.

Regarding the fear of them throwing in condos or small houses, I don't know if that will be the trend, the starter homes generally attract a larger sub prime/ alt a clientele, not really what they want to be chasing right now.

In the 1990s I saw them cut the size of the houses while trying to maintain the prices. Back then the houses were not as large. There were few 4000-5000sf houses.