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Home discounts a dream for some, a worry for others

Deep cuts may affect neighborhoood values

BY VANESSA GREGORY, Californian staff writer
e-mail: vgregory@bakersfield.com | Friday, Feb 15 2008 10:30 PM

Last Updated: Friday, Feb 15 2008 10:45 PM

Deeply discounted new homes go on sale today in two northeast Bakersfield communities, an event that has inspired stakeout tactics in some would-be homeowners and a measure of concern among those who paid full price to live in the neighborhoods.

D.R. Horton Inc., a national homebuilder based in Fort Worth, Texas, is selling homes at up to a 50 percent discount in 23 Southern California developments starting this weekend. Bakersfield's Contessa's Vineyard II and Lavender Trails neighborhoods, both located in the larger City in the Hills development, are part of the first-come, first-served sale.

One home plan, formerly listed for $380,000, has been reduced 48 percent to $199,990, according to a company sales flier.

A recorded phone message at D.R. Horton's local sales office touts the bargains as "unlike any sale you've ever seen." And that's pretty much on the money, according to industry observers, who said the sale is a drastic measure, and a sign of the impact large national builders have had on the local homebuilding market.

"They do things that we've never seen before," custom homebuilder Phil Gaskill said of his national competitors. "They overproduce homes when the market's hot. And then when it's not, they slash prices to move (inventory)."

The sales liquidate inventory to meet national goals, but they don't make a builder money, he said. And the wild price adjustments can cause uncertainty about a neighborhood's home values. But the tactics do move empty homes, and some people will get good deals, Gaskill said.

Jon Hess, a 29-year-old flight instructor, is betting on securing one of those bargains. He set up camp in front of the Contessa's Vineyard II sales office Sunday, and was still in line Friday afternoon, with the goal of buying a specific floor plan for his wife and three kids.

"I think it's a good value," Hess said of the model home he had in mind. "I like the area. It's better than the northwest."

Still, he was realistic about what this kind of sale might say about the health of the real estate market.

"Who knows?" Hess said. "Maybe by this time a year from now it's going to be worth half of what I paid for it."

The sale itself could bring down home values in the neighborhood.

While a residential home appraiser does take note of foreclosure sales and other deals that might meet the definition of "distressed," multiple low-priced sales will inevitably lower neighborhood values, local appraiser Gary Crabtree said.

"I feel sorry for the people that have purchased out there if D.R. is doing that to them," Crabtree said.

At least one Lavender Trails homeowner, Billy Abney, was worried Friday that the sale might further depress the value of his home, which he estimates has fallen $60,000 to $70,000 since he bought in the summer of 2006.

The 2,600-square-foot home plan he bought for $371,000 is being offered for sale at $230,000 this weekend.

But Abney's hopeful the sale might ultimately benefit the neighborhood by attracting stable homeowners to a neighborhood where foreclosures have started to pop up.

"We still need our community to be full," Abney said, "to fill the community out and not have vacant homes."

And Abney is well aware of how difficult it is to secure qualified buyers. He owns a second Bakersfield home that has fallen out of escrow twice. He now rents the place to a relative, but the rent doesn't even cover half of his mortgage payments.

"If I was qualified, I'd probably be standing in line," Abney said. "But I'm already buried in two houses."