Record Staff Writer
Jose A. Nuno and his wife, Gabriela, are first-time home buyers who spent six months working the busy market for a foreclosure house to fit their budget.
They didn’t buy a foreclosure, though.
They ended up buying a new house.
After several months of searching, the Nunos actually had their $250,000 bid accepted in the highly competitive foreclosure marketplace on only their second purchase attempt – generally considered to be a success story.
They also expected to spend as much as $20,000 for repairs and necessary purchases out of pocket, because their bank wasn’t willing to fund those costs.
Just in case, they took a look at some new homes, not expecting to find anything that would change their minds.
“That’s when I started realizing there was not much of a (cost) difference between new and (a foreclosure),” Jose said.
They backed out of the foreclosure purchase and bought a new 3-bedroom, 2.5-bath two-story house in a Manteca subdivision of Florsheim Homes, a Stockton builder that decided early in the housing downturn to downsize its models and prices and market affordable homes for working-class families.
Models start at about $250,000, and the Nunos bought their 1,500-square-foot Florsheim house for $285,000. The monthly payments are higher than those for the foreclosure would have been, but not by much, Jose said, and the couple wouldn’t have to struggle to come up with thousands of dollars to make the foreclosure house livable.
Although foreclosures are touted “as the best price in town – pennies on the dollar – some are gross,” he said, “and you’re going to be in an environment where you have to put a lot of money into it, from new carpeting to painting and appliances.”
Joe Anfuso, president and chief executive officer of Stockton-based Florsheim Homes, called the current home-construction market “certainly difficult.”
The numbers show it.
According to the Construction Industry Research Board, which tracks the building sector in California, there were 535 building permits issued for single-family homes in San Joaquin County during the first seven months of this year. That compares with 3,906 permits issued in the same period of 2005, the final year of the previous building boom.
Anfuso said builders have dealt with the slower market by cutting their organizations by about two-thirds from three years ago and by cutting costs as much as possible.
“It’s a difficult market to maneuver in,” he said. “It’s all about cash management and not profitability.”
Still, the low monthly permit numbers have been slowly climbing from 75 issued in April to 96 last month.
Anfuso said Florsheim has sold houses in the past two months to perhaps four or five buyers who decided to buy new after finding the foreclosure market more difficult than they expected or discovering that the homes were “more challenging” than they expected.
“The competition (for foreclosures) is fierce,” he said. “You have people who have bid five, 10, 15 times and are getting beat out. They start asking, ‘Is it really worth it?’ Our agents are fielding a lot of questions from people who are looking at that market and don’t like that process.”
Greg Paquin, president of the Gregory Group, a real-estate information and consulting service in Folsom, said builders can be competitively priced against foreclosures, but most people don’t seem to realize that yet. That’s especially true in the Central Valley, where foreclosures take up 85 percent of the market, he said.
Los Angeles-based KB Home also is reporting lookers and buyers who are checking out new homes because they were dissatisfied with the foreclosure market.
“There’s no question about it that there is a good portion of our customers who were looking at foreclosure possibilities,” said Marc Burnstein, vice president of sales and marketing for KB Northern California. “We’re seeing that every week.”
Besides facing the prospects of taking over a foreclosure that may have been trashed by the previous owner, many prospective foreclosure buyers are nervous and concerned that the repossessing banks don’t have to disclose faults and defects in the property, he said.
The company has introduced home models as small as 1,300 and 1,400 square feet, with price tags starting at about $222,000 in, say, KB Home’s Riverbend development in Stockton.
Burnstein said home shoppers are admittedly extremely price conscious these days, but the company does a lot of research to determine where to aim for buyers in a residential marketplace dominated by foreclosures.
“We are very competitive on the price side,” he said. “We’ve gone to smaller plans at a tremendous value relative to a foreclosure with no warranty and perhaps huge fix-up costs.”
Picking up new business from the foreclosure market is a glimmer of good news in a time when there hasn’t been much of that for builders.
