Sep. 2--A real estate mystery lingers in southeast Fresno: Why would a developer build two dozen houses, sell only two and then disappear?
Few cars visit this ghost tract south of Butler Avenue, known as Ashwood Park. Weeds choke many lots. The model home complex is closed. There are no real estate signs in the yards, and no phone numbers posted anywhere. Just placards in the windows that read "available."
"It's very quiet and peaceful," said Pao Ly, one of two home buyers who moved in before the developer, Lafferty Homes of San Ramon, vanished in March. He suspects the surrounding houses eventually will sell for less than the $450,000 he paid for his 2,900-square-foot home, and would like to renegotiate the deal -- if he can figure out who to call.
Even potential buyers are frustrated, Ly said. After driving by and peeking in the windows they ask him: "What happened, and how come they closed the [sales] office and why is there no contact information?"
It's unclear what happened to this neighborhood. Officials at Lafferty Homes did not respond to repeated phone calls. Nor did the developer's lender, Ohio Savings Bank. State Department of Real Estate officials don't track this sort of thing and city officials are limited in how they can respond. No public documents indicating a foreclosure have been filed.
But experts say the developer likely turned the tract over to lenders because it couldn't sell houses fast enough to cover debt payments -- much as some troubled home buyers walk away from a house they cannot afford and cannot sell.
"The odds are that there was a large loan on the land and the builder could not afford to carry the land," said Alan Nevin, economist for the California Building Industry Association.
While rare, such a step by a developer is not unheard of. And it indicates how hard-pressed some builders are in a difficult time for the real estate industry.
In a robust market, the builder likely could have sold the houses. But prices and sales have fallen, and developers are trying to sell excess lots, cutting prices, laying off workers and retreating to their home turf.
Home sales statewide are off 16.6% from a year ago, and median prices are down 5.1%. In Fresno County, prices have fallen an average of 12.5% in the past year as builders try to shed excess inventory.
Lafferty Homes may have priced the houses too high for the area, some real estate observers said. Other tracts nearby are doing better.
"The houses were too tricked out for the area," said Walter Diamond, executive vice president of the Fresno division of Beazer Homes, which has a tract in the area.
Houses at Ashwood Park started at $386,990 and went up to $475,990. Homes in competing projects were smaller and nearly $100,000 less, according to The Gregory Group of Sacramento, which tracks sales activity.
"It is not indicative of what is happening in southeast Fresno," Diamond said. "All the other builders, including us, are selling fairly well."
Lafferty Homes won approval for the 92-lot tract in 2005 and put up model homes. "They built when the market was hot. They thought they would have no trouble selling them," said Ly, the homeowner.
The homes were virtually complete, lacking only carpeting and some interior fixtures when Lafferty stopped the project last spring.
The company hinted at what might come when a representative of the company appeared before the Local Agency Formation Commission in Fresno early this summer.
Michael Smith asked the panel, which rules on land annexation requests, to postpone a decision at Dakota and Cornelia avenues, where Lafferty proposed another project.
According to minutes of the meeting, "[Smith] indicated that due to market conditions Lafferty Homes was considering terminating its development proposals."
However, Lafferty is pressing ahead on a project in Sanger, where 12 houses are under construction. Builders typically put projects under separate entities to avoid tainting all should one go bad. The lenders also often are different.
What happened to Lafferty at the Fresno project is unlikely to become widespread in a homebuilding industry dominated by big companies, experts said.
"Larger public builders say, 'I'll take a loss in Fresno and Merced and make it up in Texas,' " said Greg Paquin of The Gregory Group.
Smaller builders may not have that option.
Nevin of the CBIA said national builders control most of the parcels in the state, and have the financial horsepower to finish troubled communities.
"They won't walk because they have the money to hold. They typically don't borrow to buy land. They use real live cash," Nevin said.
Instead, those developers likely will delay or drop planned projects. Regional builder Dunmore Homes is pressing ahead with tracts in Dinuba but is putting one at Temperance and Dakota avenues in Fresno on hold, for example.
The company will finish grading the site but won't go any further right now, said Mike Lutz, division president.
"In light of the current marketplace, we are concerned about putting more money into it and bringing it to market," he said. "We will sit and wait."
Dunmore's office staff in Fresno, which oversees projects in Dinuba, Bakersfield, Merced, Atwater and Livingston, has shrunk from 12 employees to five, Lutz said.
Even Lennar Homes, one of the largest public builders in the nation, is delaying some plans.
"In some areas we've put a temporary halt on projects until the market improves," said Steve Lutton, regional vice president.
Eventually, experts say, the market will recover and developers will again start buying lots and finishing out the Lafferty tract and others like it.
"Through ashes a Phoenix will rise," said Robin Kane, a real estate analyst in Fresno.
It's unclear how long it will be for Ashwood Park to revive. For now, however, the ghost tract provides a great place for one nearby resident to get her daily exercise.
Nicole Frost chose the route because it has few cars and is safe.
She pushes a baby stroller past empty houses and vacant lots and wonders what will become of the neighborhood. "It would be weird living here," she said. "I never see people."
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