Sales Reports Mask Decline in Valley House Prices : New tracts: Builders are switching mid-project to less costly designs that sell more briskly. Those who bought the larger residences are upset.
To see the dramatic changes in the Antelope Valley’s new-house market over the past year, Frances Abele and her husband only have to look outside to survey their tract in Palmdale.
A year ago, the plan was to fill the tract with big two-story houses like the one the Abeles had bought. But today, with only about one-fourth of the project built, their developer has suddenly decided to finish the tract with houses up to 50% smaller and less costly.
Throughout the Antelope Valley--the largest new-house market in Los Angeles County--developers are being forced to build smaller and less expensive houses to maintain sales. Pricier residences simply were not selling amid the recession and housing slump.
In Palmdale, an informal Times survey showed at least six partly built tracts that developers, due to stagnant sales, have essentially halted to change to lower-priced, smaller houses. And even the names of the tracts are being changed to reflect the shift.
The Kaleidoscope tract by The Anden Group, based in Sherman Oaks, is becoming the Anthem project. Barratt American’s Altana project is giving way to Serenade. Brock Homes’ Rancho Vista project has become Country Edition. And Marlborough Development Corp.’s Sunrise Point is now Heritage Series Sunrise.
The shift has angered the Abeles and other buyers of the larger, more expensive properties. After moving in, they discovered that their neighborhoods will not be what they had expected. They feel misled by builders and worry that the smaller, cheaper additions--sometimes just next door--will devalue their houses.
“It’s very controversial in this tract,” said Abele, a former Sunland resident who paid $154,000 for a 2,400-square-foot house in Pardee Construction Co.’s San Carlos tract in April. “We were told this would be a luxury tract. And now they’re putting in 1,100-square-foot homes.”
However, the news is good for first-time home buyers, who already are benefiting from low interest rates on mortgages. The trend to downsizing has helped drop the bottom price for entry-level new houses--three bedrooms, two baths, 1,200 square feet--to about $110,000 in Palmdale and less in Lancaster.
Developers maintain that they must build houses that will sell.
“You’d do the same thing if you were in the developer’s seat,” said Hal Struck, senior vice president for sales and marketing at Pardee, a Los Angeles-based builder. “You have to address the market as the market changes.”
Indeed, other builders throughout Southern California have made similar moves and have sparked similar controversy.
Over the past year, several builders who had already completed tracts of relatively expensive houses suddenly found they couldn’t sell all of the properties. So they held auctions to move the inventory, with the bidding often starting 40% or more below the houses’ original asking prices. People who had bought at the original asking prices were not pleased, to say the least.
In the Antelope Valley, the median sales price for new single-family detached houses has tumbled from a high of $158,950 in late 1989 to $137,900 in the three months ended Aug. 31, reflecting both the softening market and buyer demand for lower-priced houses, according to The Meyers Group, a real estate consulting firm in Encino. The median price means half the houses sold for more and half sold for less.
The firm reported 920 sales of new detached houses in the Antelope Valley between June and August, the second-best showing for a quarter since early 1989. But the valley also had a standing inventory of 1,605 unsold new homes, a 22-week supply at the current sales rate.
Pardee’s San Carlos tract was to have been about 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 building about 70 houses and this month opened Spring Ridge, where the least costly house is 1,130 square feet and costs $110,900.
The earlier San Carlos buyers want rebates, and they talk of picketing the new tract or even suing to halt Spring Ridge. But the developer says that they should be glad the remaining San Carlos lots won’t be vacant.
The same downsizing also is coming to new tracts, as builders try to recover from a sales slump that hit the Antelope Valley in late 1989. After several years of frenzied building and sales with ever-increasing prices and house sizes, some builders concede that they priced themselves out of their market.
“I think we all got a little bit out of line,” said Michael Rabin, senior vice president of The Anden Group. “Today, the majority of our market is the first-time buyer.” Rabin said his company has tried to persuade its Kaleidoscope owners that they won’t be hurt by the Anthem homes.
Developers say they, too, have been hurt financially by now having to build economy-priced homes on lots that they often bought at a premium with grandiose building plans. And they insist that they would rather be building pricier, more-profitable houses if there were buyers.
Some blame the slump in higher-priced houses in part on slowing sales of existing houses in the San Fernando Valley and elsewhere, where people who would otherwise “move up” are unable to sell their houses. Builders also say that only inexpensive houses provide enough incentive for buyers to accept the long commutes common for high desert residents.
Even in today’s depressed housing market, Antelope Valley builders say affordable houses sell. For example, Kaufman & Broad Inc.’s California Ridge project in Rosamond, where prices start just above $80,000, had 46 sales between June and August, according to The Meyers Group consultants.
