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Ray Williams, 16, directs potential homebuyers to a
new subdivision in Lincoln - where developers have
increasingly been offering deep discounts to sell
homes.
On a wintry weekday in California's fastest-growing small city, Bryan Petersen steps from a sales office to discuss how eager home builders are to make any kind of deal with people like him. "They're asking $453,000 and offering $60,000 in incentives," he says, standing outside a 2,700- square-foot model where flags of a giant corporate builder whip in the wind. He nods back toward the sales rep and grins. "And she said, 'Make me an offer.' "I think you could get this probably for $375,000," says Petersen, a father of four who arrived in Roseville last year from near Las Vegas. Says his mother, Barbara, visiting from Orange County: "That's unbelievable." Believe it, say Sacramento-area real estate analysts. As the nation's largest publicly traded home builders overbuilt and then jostled for a shrinking share of area home buyers last year, they turned the boomtown suburb of Lincoln, population 39,000, into one of the Sacramento region's most ruthless sales battlegrounds -- and conversely, one of the best for buyers, Peterson believes. A city that burst off its fertile terrain during the five- year housing boom now showcases the rough-and- tumble tactics of U.S. home builders as they unload excess inventory in once-sizzling markets, from California's Central Valley and Inland Empire to the coasts of Florida. It's no surprise in Lincoln to see advertised price cuts on new homes of $96,000, $103,000, $150,000 -- even $221,000. The price-cutting battles reveal how pressures on big public companies to sell extra stock can also impact individual sellers and small-time speculators -- even entire counties. Real estate experts blame Lincoln's price wars for fueling a 55 percent drop in new home sales in Sutter and Yuba counties. Some analysts, in fact, say it was the slowdown in Lincoln that signaled the end of the housing boom regionally when, in late 2005, it became the area's first market to buckle under the weight of too many new homes similarly sized and priced. No other city in the region has so much new building activity -- 33 projects and 14 home builders -- for such a small population and place. Or such a reliance on supersized master-planned communities: the 6,800-home Sun City Lincoln Hills, 4,300-home Twelve Bridges and 2,900-home Lincoln Crossing. "Lincoln Crossing has 17 projects, and they're all fighting it out on similar lot sizes," says Greg Paquin, a Folsom-based home builder consultant. "With public companies you're going to have some infighting." Builders rushed into Lincoln in 2002 and quickly turned it into the state's fastest-growing small city. But they kept building at a boom intensity early last year even as the market cooled significantly. With more homes than buyers, they unleashed giveaways, incentives and discounts that are only now beginning to ease as the inventory of unsold houses slowly shrinks. Through Nov. 1, builders sold 1,249 new houses in Lincoln, compared to 1,813 in all of 2005, according to Hanley Wood Market Intelligence, a Costa Mesa-based housing analyst. But the competition among big corporate builders has had a number of collateral effects. Speculators who missed the window to "flip" their investments now find them nearly impossible to sell. And the alluring discounts for new Lincoln homes have flattened sales to the north in Yuba and Sutter counties. Builders in those two counties sold 811 homes in the first nine months of 2006 -- after selling 1,789 during the same time in 2005, according to Paquin. "That was the affordable market when prices in Lincoln and Placer County were increasing," he says. "Plumas, Linda, Olivehurst and Marysville were the affordable option. If you can get a similar-sized house in Lincoln for the same price, nine times out of 10 people will stay in Placer County." Such fallout represents a typical overreach during a housing boom, says Gregory Gieber, who tracks publicly traded home builders for the St. Louis-based investment firm A.G. Edwards & Sons Inc. "They overproduce like the car industry overproduces," Gieber says. "Then they have to cut the price. Once you start in on a building project you pretty much have to build to completion and take what you can get for it." For the 510 Lincoln homeowners who had "for sale" signs in their yards in early December, competing against Wall Street home builders like Centex, D.R. Horton and Lennar is difficult. "A lot of investors who got into these homes last year made a big mistake, and I think a lot of them will be forced into bankruptcy," says Henry Ung, an Elk Grove real estate agent who represents two investors and bought an investment home in Lincoln himself. "These investors cannot compete with the builder. It's very tough for us." In 2004 and 2005 investors bought up to 17 percent of the homes sold in Lincoln, according to DataQuick Information Systems, a La Jolla-based property researcher. Now, buyers such as Petersen drive past their "for sale" signs because it's cheaper to buy a newly built home. "This reminds me of Orange County a long time ago," says Petersen's mother, Barbara. The Aliso Viejo resident remembers new housing there exploding just as it has in Placer County. Eventually, she says, higher prices will follow and make today's deals a memory. "I think in seven to 10 years this region will be unaffordable," she says. At City Hall, officials acknowledge possibilities that 2006's slowdown may cost Lincoln its fastest- growing small city status. But thousands more new houses are still a sure bet, says community development director Rod Campbell. In 10 years the city will be well on its way to a 2050 build-out population of 120,000. Campbell says seven more major residential and commercial "villages" are in the city's planning process. "Over time we need to develop enough population to attract retail users," he says. Lincoln, a railroad town incorporated in 1890, slumbered through a century before being discovered a decade ago by the nation's largest developer of active adult communities. By the late 1990s, the city became a destination for Bay Area retirees lured to Del Webb Corp.'s Sun City Lincoln Hills. A decade later and a short distance to the west in Lincoln Crossing, Doug Pautsch concedes it's been a tough 12 months for Lincoln's home builders. Oversupply and a lull in buying activity drove prices "artificially low," said Pautsch, the Sacramento division president for Dallas-based Centex Homes. Written By: Jim Wasserman from the Sac Bee |
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FOR A FREE MARKET ANALYSIS OF YOUR HOME AND ESTIMATE OF VALUE CALL OR EMAIL ME! I WILL GET YOU THE INFO WITHIN 24 HOURS OF YOUR REQUEST. Please contact me with all of your real estate needs and questions. I am always available to you, your family and friends!
Happy New Year,
Kia Kapci
Lyon Real Estate
email:
kkapci@golyon.com
phone:
916-960-7010
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