Do you want a house? Then do it. Go buy a house. If you have any money at all—some savings, lotto winnings, an inheritance—then put down this paper and go get yourself a new dwelling.
There may be some extras in it for you if you do. Michael Crews Development, a company in Escondido, made the international news circuit when it recently offered a two-for-one deal. Buy one Michael Crews house for more than a million, get a $400,000 single-level for free. That’s right, people: Homes have gone on sale.
“The market, unfortunately, is what it is,” said Dawn Berry, director of marketing for Michael Crews Development. “We noticed the lull and the stagnant response to our ads.”
In the past, she said, the company gave away cars with the purchase of a new house, but that just wasn’t working for them anymore. During a sales meeting, the idea of a buy-one-get-one-free house was thrown out there, and it stuck.
The promotion attracted tons of media attention, and lots of people came by to check out the deal for themselves, Berry said—though only one person went for the deal, which ran from May 18 through June 30. The rest of the buyers, about three in a month’s time, negotiated a reduction on the price of a new home instead.
On the Central Coast, no one is giving away houses, but they are throwing in cars. Trilogy Central Coast, a housing company selling homes at The Woodlands in Nipomo, is giving away a brand new Toyota Prius with the purchase of one of its homes.
Three people have taken the company up on that offer so far, said Frank Smith, sales manager at Trilogy. Another five buyers have bought a house, but turned down the car during the same one-month period, bringing their total sales to eight this month—a good number, considering the current market, Smith said.
“It’s a great month for us,” he said. “We’re exactly where we expected to be.”
The key word during this new and slightly more hopeful housing market may just be “expectations.” Sellers have had to adjust—i.e. lower—their expectations, by giving away cars, negotiating prices, and throwing in some extras. Buyers, on the other hand, are raising their own expectations, asking for more price incentives, expecting better prices, and not settling for anything less. It’s a reality that’s set in both for new developments and existing home sales.
Given the recent housing crisis, however, lowered expectations might be an okay thing—as long as there’s a glimmer of hope on the horizon. Martha Beckman, president of the Santa Maria Realtor’s Association, is seeing some of that hope right now.
When it comes to pre-owned homes, the news is getting better, Beckman said. Foreclosures are leveling off, though she’s expecting a few more in the next year.
“We haven’t seen the last of it, that’s for sure,” she noted.
On the brighter side, the last few months have been some of the best that local Realtors have had for years, Beckman said. Homes are selling, just not for as much as they used to.
“At least people can look forward to selling their home, if not for the price they wanted,” she said. “I think there’s a little more hope for these people.”
Foreclosure sales still make up 50 percent of the business at Prudential California Realty, where Beckman works. To put that in perspective, before the housing crisis, the number of foreclosure sales was in the low single digits in terms of percentage of business, she explained.
About 25 percent of buyers right now are investors, she said, looking to buy homes now when they’re cheap and sell them for more later. The remaining 25 percent of sales at their office are to regular people just looking to move or get another place, she said. These so-called normal buyers are returning slowly, and these are the buyers that will eventually return the market to normal.
Beckman’s observations confirm what seems to be happening with existing home sales nationwide. The latest forecast from the National Association of Realtors since the beginning of July shows that sales are down, after experiencing a slight increase last month. Overall, existing home sales are expected to increase by 5 percent in 2009, according to the report.
New home sales are a different matter. There’s a glut of developments throughout California and not as many buyers willing to snatch up those homes. Sales of brand-new homes are likely to fall 32.3 percent nationwide to 525,000 in 2008 and decline another 3.4 percent next year to 507,000.
The price of these new homes is going down. The median new-home price is expected to decline 3.2 percent to $239,300 this year, and then rise 5.3 percent in 2009 to $251,900, also according to the National Association of Realtors.
But there are some buyers out there in the Santa Maria Valley—or they will be, once they move into their brand-new homes. There are developments in this area that are doing well—not exceptional, maybe, but respectable, in terms of sales.
“It’s hard to talk to some of my colleagues in other areas who are struggling,” said master developer John Scardino, as he drove a golf cart around the Woodlands in Nipomo.
That’s because Scardino isn’t struggling. In fact, he’s doing just fine. Scardino is the man behind Rice Ranch in Orcutt, a development that’s created some buzz in the local real estate market because the homes are selling.
About 20 homes are already spoken for, Scardino said. Rice Ranch opened for business on June 7.
“You pick a good property, put in amenities, and price accordingly,” Scardino said, explaining his success in simple terms.
At Rice Ranch, nothing is left to chance. That may be the unspoken secret. Each model home is immaculately decorated, and marketed toward the Rice Ranch target customer: Baby Boomers looking to retire in comfort.
The first model home was made for a metropolitan couple with kids headed to college, explained director of sales, Jim LaLoggia. The second model home was designed for a professional couple, retired, with a family.
LaLoggia prepared well, because these are exactly the sorts of people who have bought homes at Rice Ranch, a sprawling location with bike and hiking trails, open space, a playground, baseball and soccer fields, and even a dog park.
So where do they find these retired couples and professionals ready to buy a home right now? Not around here. The majority of buyers so far have come from out of the area. They’re coming from San Luis Obispo, where home prices are still too high to be affordable for many people. They’re coming from Goleta, where the spillover from Santa Barbara makes houses a bit pricey. And they’re coming from as far as the Bay Area and the Central Valley. They’re Baby Boomers looking to retire to the Central Coast where the weather’s nice and the houses are more affordable than the homes where they live now.
Just 10 to 20 percent of buyers so far have been locals, Scardino said. The problem, he explained, is that locals have to sell their current homes before moving, and first they have to find a buyer. That might take a while.
There are multiple phases of the Rice Ranch project, a development located off of Bradley Road in Orcutt. The first phase includes houses on the lower end of the price scale, from $300,000 for condos to $600,000 for larger houses. Later on, Scardino plans to add more houses with larger lots in the $800,000 range. He doesn’t want to roll out the more expensive lots until the market improves, he said. The entire project should be finished by 2014.
While Scardino’s team is rolling out the pricey homes slowly, they’ve already built them up at The Woodlands. Scardino has a connection to this Nipomo project, too. The simplest explanation goes like this: Scardino owned the land, he sold it to Trilogy Central Coast, and they are building most of the homes at the site and selling them to more Baby Boomers.
“Boomers are really the entire real estate market right now,” said Preston Holdner, general manager of Trilogy. “It’s the largest and most affluent demographic.”
Homes at Trilogy start at $500,000 and go into the low millions, with an average cost of about $700,000. This development, too, is looking at tapping into the retirement demographic. It’s been around for three years and in that time, about 200 of 1,100 homes have sold.
About a quarter of those buyers are from Southern California, Holdner said. Another 25 percent are from the San Luis Obispo area, and the rest from the Bay Area or the Central Valley. Seeing a pattern?
What they get for their money is more now than it would have been five years ago. Trilogy is offering incentives of up to 15 to 30 percent off the price of homes, Holdner said. Buyers have received a new Prius, or upgrades to their interior or patio. All homeowners at The Woodlands have access to the Monarch Club, a semi-private facility with a restaurant, bar, spa, gym facility, and a large pool.
Then there’s the golf. Almost every house has a view of the greens, a feature owned and funded by Scardino and his development company.
The locations of Rice Ranch and The Woodlands have been the keys to their success, Scardino said. It’s not as easy to get projects built here as it is in the Central Valley, he said. Plus, he planned for this market downturn. He knew it was coming.
While the market lingers, there will still be buyers for the best quality properties, and Scardino is confident that his company’s success proves that he knows quality. But that doesn’t mean he won’t cut you a deal. At Rice Ranch, they’re seriously considering following Trilogy’s lead and giving away a Prius with each home purchase.
Which brings us back to this: “For buyers, it’s a great market,” Scardino said. “They can wheel and deal right now and get what they want.”
Contact Sports Editor Sarah E. Thien at sthien@santamariasun.com.
This article appears in Jul 10-17, 2008.