What were they thinking?

[CANative]

There's this little city of 5,000 in Mendocino County named Willits. It used to be a lumber and timber town. The nearest community north is about 20 miles and has a population of about 2,000 with not much going on. Further north there is nothing but range and timber lands for 100 miles. There is nothing to the east until you get about 100 miles away if there were any roads. Nothing west until you get to the Pacific Ocean about 35 miles away along a winding, 2 lane road through redwood country. The nearest city south is Ukiah with a population of 15,000. No big industries, schools or employmnet. The nearest metropolitan area with jobs, cultural events and collegs is Santa Rosa, about 90 miles away.

Willits has 3 "areas." The downtown area which is flat and incorporated. Mostly old houses on small lots with a few neighborhoods built out in the 1980's. Pricing is anywhere from $175 to maybe $400 at a stretch. Then there is a big subdivision up in the hills northwest with about 1500 or so sites. Pricing is about the same as the flat lands. Then there are the rural areas surrounding the cities. Mostly acreage, very rural. Pricing varies but can start out at $300 for a modest older farmhouse on a acre or two and go up to $600 or a little more for a large custom house on 20 to 100 acres.

There are about 1 or 2 sales per year in town at $400k. There just aren't enough people who make enough money to buy houses in that higher price range and driving to work is a 180 mile round trip if you have to go to Santa Rosa. total of about 100 sales per year in the entire region which is about 200 square miles.

Now some yo-yo has built out a little subdivision, just outside of the city limits with 50 brand new good quality houses, 2200 sf to 2800 sf, on small lots and has put them all on the market at the same time. Pricing is $450 to $620. They've been on the market for 18 days now. There was a pre-sale in October prior to construction. The buyer has a Santa Rosa Address. I think the buyer is either goofy or it's not a genuine buyer (owner of record is a trust).

Locals cannot afford them (you'd have to make at least $100k per year) and no one makes that kind of money unless their self employed or want to dirve to Santa Rosa and back every day). With aboout 2 sales per year in that price range the absorption rate would be more than 20 years. LOL.

I'm not sure how to deal with this amount of inventory in the general scheme of things when appraising in this town. It's too soon to tell if, and, or a negative influcence will result.

Just ranting, but comments are welcome.

 

[stefan olafson]

It used to be said 'only in California' but from recent threads and national news, this is a all too common problem.

Builder / Developer had best have real real deep pockets to hold out long enough to sell these? They always say no price is too high, you just have to extend the marketing time!

 

[Ray Miller]

Would the market be:

Retirees,

On the Road Sales people or Sale managers that location don't mean much.

2nd homes

Goverment employees Dept of Ag or Dept of Interior who work in the area.

???????????

Your right that sounds like a lot of inventory for the area. I see some of that around the rural parts of Wisconsin.

 

[CANative]

Would the market be:

Retirees, I doubt it. Retirees with that kind of money would want to live in Santa Rosa where they can get the early bird special at Lyons and where there are hospitals and doctors. Nothing like that here.

On the Road Sales people or Sale managers that location don't mean much. No place to sell anything north, east or west and who wants to start out on the road from 100 miles away before you even get to a place where you can drive around and sell something?

2nd homes. Few are around here can afford first homes.

Goverment employees Dept of Ag or Dept of Interior who work in the area. You'd have to be a G12 to make that kind of money. Not enough of them anyway to abosorb this many houses.

??????????? I agree

My assignment is not for one of these properties. I will probably decline any assignment for one of these propeties.

 

[Ted Martin]

I've got the same thing going on in my market area. One little town that can absorb maybe on new construction a year at $175000 has a new subdivision with 14 new homes at $200,000. These things have been on the market for a year and a half now. Same MO as you little town, no income, no services, no growth but a ten year supply of new homes for sale.

I'm seeing the same thing in our duplex and multifamily market. It's almost like these guys don't care if they make any money. We're approaching a 15% vacancy rate and they are still building.

 

[Riick]

So.. who did the market analysis and absorption rates for the Lender that funded this Fiasco-in-the-making??
As for the Builder -
(a) Bet no one signed personally.
(b) Bet he's also the GC, and has a contract for a draw of $10-$15,000/week for his work until project sold out -- or goes belly-up.

 

[Karl]

Watch this closely Greg I'm betting your gonna have a similar problem we haver here in a town called show low Follow the money.

 

[Abzntminded]

Greg, it's kind of ironic that you're profiling this community with a question of "where's the money?" -

Exactly 25 years ago Willits was one of the major beneficiaries of the newer agricultural industry (right after southern Eureka) of the times. The Safeway was remodeled, the nearest Ford dealer was swimming in cash sales of lifted 4X4 f-150's (painted camouflage) and the major supply outlet was a store called "Picky-picky" (with a sister store in Ukiah).

Then CAMP came along - I didn't know how effective they were the next few years; based on your description, maybe they were very effective.

So it would be ridiculous to ask if this development was anything related to agricultural money laundering, right?

 

[CANative]

25 years ago they were excited about a Highway 101 bypass through the area. They're still waiting. They zoned all those little residential streets between Safeway and San Francisco Street C2 waiting for the business to happen. They're still waiting. 25 years ago REMCO was just a closed up metal plating company and no one had heard of Erin Brockovich or hexovalent chromium plumes. And while CAMP can helicpoter in and scoop up 20,000 or 30,000 plants, it's only a small fraction of the harvest. But we changed the law here in Mendocino to where people can only grow 25 plants per lot no matter how many permits they have.

LOL.... an entire subdivision of pot growers. I can just see the hoardes of nomadic, low life pot trimmers wandering those neighborhoods instead of panhandling at the Jack in the Box.

BTW... It's nice to know someone familiar with my area.

 

[Richard Carlsen]

Developers and builders often see only what they want when they have the chance to buy a chunk of land at a very advantageous price. Build a half million dollar house and you will make more money than building a $150K house that would better fit the market.

They must have OD'd on Field of Dreams, thinking that "If you build it, they will come." is some sort of holy gospel quotation.