There’s not a lot going on in Calico Terrace these days.
Just over two years old and still under construction, the hilltop subdivision overlooking the desert city of Palmdale has had to contend with the painful effects of the housing market collapse. One of the last remaining developments still under way in the Antelope Valley suburb, Calico Terrace has seen sales slow since Los Angeles-based developer KB Home broke ground on the project in 2006.
“It’s quiet,” said Kaycee Quinton, who moved into Calico Terrace in October with her husband and two children after their mobile home burned down.
With a corner house just off the main road, Quinton said she rarely sees anyone other than motorists passing through. “There’s not a lot of neighbors around. And the lady next door just lost her house.”
Developments like this dot Southern California and much of the country. Conceived during the boom times when home prices were rising to unprecedented heights, many of these projects have since been abandoned or left unfinished.
Calico Terrace, in particular, is emblematic of the problems faced by so many new housing developments.
KB Home received approval from the city in September 2004 to build the 174-unit project. But as market conditions began deteriorating, the company scrapped plans for larger, more expensive homes and decided to scale back the size of its units. In reducing the sizes, the company also cut the price of its least expensive units by more than 20 percent.
But even with lower priced units, KB Home has struggled to find buyers in this down market.
Nearly one in every three homes approved by the city have not yet sold, leaving scores of bare lots abutting newly landscaped homes. (KB builds the homes to suit after a sale has closed.)
However, the company is still pushing ahead with the development. With about 50 houses left to sell, KB Home has aggressively courted potential buyers and offered highly customizable homes as an incentive.
The company unveiled a program called Open Series, which gives buyers the freedom to choose from a list of options or features. They can even go so far as to lop off entire rooms, which can dramatically reduce the price of the home.
The Calico Terrace homes, priced primarily in the low $200,000s, allow buyers monthly payments of around $2,000. The company is even advertising prices as low as $1,323 per month.
Boom and bust
Still, the subdivision faces stiff competition from a glut of cheap homes on the market, either built on spec and unoccupied or being resold by financially distressed homeowners or banks that have repossessed them.
Palmdale, like many inland communities in Southern California, has seen foreclosures spike over the past year. The city saw its population balloon in the late 1990s and early 2000s as the availability of low-cost mortgages gave many first-time buyers the opportunity to purchase their own homes. But as the mortgage market cratered in 2007, rising defaults and foreclosures flooded the market with inexpensive houses.
Despite cutting prices, Calico Terrace has found it difficult to compete with the large number of inexpensive resale houses now available.
“They’ve gone back to the table and redrawn several of their plans and their layouts (but) they’re still overpriced a little bit,” said Mark Chappell, an agent with Keller Williams Realty in Palmdale. “The KB Home tract is asking $25,000 higher for the same type of home (in the resale market).”
Sales at Calico Terrace, however, have not dried up completely, with a recent market report from Sullivan Group Real Estate Advisors calling the subdivision’s performance “particularly remarkable in that Palmdale is otherwise a distressed market with high levels of foreclosure and abandoned projects.”
Indeed, KB Home has gone on the offense against foreclosed homes. The company created a flier that is available in the Calico Terrace sales office that lists the benefits of buying a new house. “Think foreclosures are a better bargain? Look again,” blares a headline at the top of the sheet. There are often unforeseen costs, such as replacing outdated appliances and making repairs, the company said.
The argument won over Ana Sukal, who moved into Calico Terrace in February 2008. Sukal said she and her husband had considered buying a foreclosed home, but found that she likely would not have saved as much money as she anticipated.
“We did look at foreclosed homes, but the price for this house was good,” said Sukal, who commutes each day to her job in Beverly Hills.
But though she said she is pleased with her new home, Sukal, like her neighbor Quinton, said she has been struck by the lifelessness of the community. “There’s not many people around.”
