Builders Cut Corners in Recession : Housing: Size, quality and cost of homes are being scaled down to boost sales in midst of a slump.

The slump in new home sales is causing developers throughout Southern California to confront what one designer called the “new reality”: the need to scale down plans for new subdivisions to offer more affordable units.

But the downsizing can be a bitter pill for neighboring owners of earlier, larger properties, some of whom complain that they moved into their houses to discover that their neighborhoods will not be what they had expected. They feel misled by builders and worry that the smaller, cheaper additions--sometimes next door--will work to reduce the value of their houses.

“Retooling” is the buzzword that describes the process by which recession-struck developers reduce lot sizes and floor plans by as much as 20% and eliminate design frills, including cathedral ceilings, skylights, bay windows and fancy bathroom fixtures to trim construction costs.

Modifications such as these cut $100,000 off prices at houses offered recently in the Carmel Mountain Ranch area by developer Presley of San Diego. And to better “position” the new units in the marketplace, Presley changed the name of the project from “pretentious sounding” Monthaven to Walden, a name with “back to the basics” connotations, Presley vice president Bill Probert said.

As Monthaven, the Presley units were to have cost up to $350,000 each. Now, the scaled-down Walden units are priced no higher than $265,000. And, once Walden is sold out, Presley will build even cheaper units. “Everything we are building over the next two years will be priced under $200,000,” Probert said, adding the developer will concentrate on multifamily projects until the housing market rebounds.

Plans at other Southern California housing tracts are being revised as well. In the Los Angeles County city of Palmdale, an informal Times survey turned up at least six partly built tracts that developers, because of stagnant sales, essentially retooled to lower-priced, smaller houses. Kaufman Meeks Architects, a Newport Beach housing design firm, said recently that more than 50% of its work involves downsizing existing subdivision plans that are now too pricey for the market.

The retooling trend is an unwelcome one, however, for Frances Abele and her husband, who paid $154,000 for a 2,400-square-foot house in a Pardee Construction Co. project in Antelope Valley in April. She said the developer’s retooling may change the character and value of the entire neighborhood, a subdivision called San Carlos in Palmdale.

“It’s very controversial in this tract,” said Abele, a former Sunland resident. “We were told this would be a luxury tract. And now they’re putting in 1,100-square-foot homes,” she said.

Pardee’s San Carlos tract was to have totaled 263 homes, ranging from 2,034 to 2,839 square feet and carrying top prices above $210,000. But, because of the housing slump, Pardee switched plans after about 70 houses and this month opened Spring Ridge, where the least costly house is 1,130 square feet and $110,900.

The earlier San Carlos buyers want rebates and talk of picketing the new tract or even suing to halt Spring Ridge. But the developer insists they should be glad the vacant San Carlos lots won’t remain dirt, and that they at least will have compatible houses.

Presley of San Diego’s Probert said the retooling of his Carmel Mountain Ranch project has not caused any problems with neighboring homeowners because the retooled subdivision “still has the same architectural integrity, consistent designs and specifications.”

Presley and other developers say their goal is to try to find a common ground with buyers, who, for the most part, are staying away from subdivisions in droves. High prices, economic uncertainty and a sluggish market for existing homes are some of the factors that are depressing new-home sales.

During the three months ended in June, for example, only 1,132 single-family houses were sold in San Diego County at an average price of $276,000 each. That compares with 3,018 detached units sold over second-quarter 1988 at an average price of $174,600, according to Market Profiles of San Diego, a residential housing consulting firm.

The market slowdown has taken a toll on the county’s builders, who, after a six-year boom, are struggling to survive. Several local developers have gone out of business or laid off employees, casualties of San Diego’s dubious status of one of the nation’s least affordable housing markets. Builders--or their lenders--have in some cases had to resort to public auctions to unload unsold houses.

“Developers are dealing with situation of there being no economic expansion,” said Market Profiles of San Diego President Russell Valone. “People are fearful for their jobs, there are scale-backs in whole elements of the economy. As product prices increase, the demand pool shrinks.”

Developers also have been hurt by the slowdown in existing home sales, which remain sluggish despite flat prices and declining mortgage rates. Through August, the San Diego Board of Realtors reported total year-to-date sales by member realtors at 10,826 houses and condominiums, down 16% from the total units sold over the same eight months last year.

Acknowledging that new home prices have outpaced the market, Presley’s Probert said the features that his firm and other developers are now eliminating from subdivisions were the same ones that were added in recent years to justify the rapidly rising prices that developers were fetching when the market was spiraling upward.

Last year, when Presley decided to rethink its Woodhaven project, the company invited prospective buyers to voice their opinions in focus groups. The message came through loud and clear: the buyers were willing to accept fewer features, frills and architectural details if it meant a lower price.

Aram Bassenian, president of Bassenian/Lagoni Architects in Santa Ana Heights, the design firm that Presley hired to retool the San Diego project, said he had to walk a fine line in making the redesign.

“If you overdo it, if you cut too deep, you will take away from the impact of the house. And, if we learned anything through the 1980s, it was the evolution of design that created a wonderful house that looked larger than its square footage,” Bassenian said.

One of Bassenian’s cost-cutting techniques was to eliminate as much custom framing as possible and as many exterior nooks and corners, a modification that “reduced the construction cost from the foundation, right through framing and to the interior finishes. The cost savings multiply throughout.”

“We are calling it a new reality,” Bassenian said. “The excesses of the 1980s are gone. The new reality dictates that prices are closer to 1988 prices than to 1990 prices.”

Peter Reeb, partner of Meyers Group housing consultants said developers are changing plans because, for the most part, they have already cut as much discretionary profit as possible.

“A year ago when the market slow down really hit home, the builders started to adjust prices. In some cases it worked, but now builders may be at a point where they can’t lower any more. So, many are rethinking their projects,” Reeb said.

Times staff writers John Chandler and John O’Dell contributed to this story.