Wells and Johnson aren't alone. As the Antelope Valley housing market starts to rebound, the people who made it through the crisis of the past two years are working hard to rehabilitate their property--and their bank accounts--by re-building from the ground up.
Some, like Wells and Johnson, never got their projects off the ground in the first place. Others, like developer Jennie Stabile, caught the bubble mid-burst and are now finally able to sell the product they had hoped to sell years earlier. In the back of everyone's minds is a fundamental question: What is going to happen next?
'Just A Hiccup'
Mike Wells and Andrew Johnson had big plans. At one point in 2005, Wells had contracts signed to build over 500 houses across the Antelope Valley. As far as he was concerned, it was money in the bank. On New Year's Eve in 2005, Wells and Johnson celebrated on the roof of the building where they had adjacent offices.
"We took a couple of beers and cigars up to the roof and we were talking about what we were going to do next, and I think we were a bit premature," Wells said.
"That's what jinxed us," Johnson added.
"And then the economy hit," Wells said.
Wells imagined that after he built and sold those 500 homes, he was going to earn between $8 million and $10 million. And Johnson, too, could smell his commissions--he was expecting to earn $3 million.
But even though Wells had signed contracts to build those houses, none of them came to fruition, as banks pulled back their funding, and builders and developers alike started declaring bankruptcy.
Johnson, who owned his own real estate firm, Antelope Valley Realty, had to shut down his business and go to work as an agent at Century 21 in Lancaster. Wells kept his business, Wells Eason Development, open by borrowing on credit cards and taking out loans from friends.
Today, Wells and Johnson are starting from scratch, with one plot of land at West 60th and K Avenue, where Wells plans to build 22 homes that Johnson will sell.
"I call [the past four years] a hiccup," Johnson said. "It's a big one, but it's just a hiccup. One thing about me and Mike is we're set, we're set in our ways. We're not going to give up."
The development plan for this plot of land has been the same since Wells acquired it five years ago. Since then, he's started the construction process four times. That means four times funding has fallen through.
The first step with any virgin land development project is to clear and grub the soil--removing the yucca trees and tumbleweeds, grading and compacting the dirt. When Wells starts construction again in the next month, he'll have to clear and grub for the fifth time. Weeds have returned to this lot, and the winter rains have carved deep runoff trenches. There is a faint suggestion that homes could one day stand on this land--contractors did complete the development's curbs and gutters.
One thing will be different, however, when construction starts again. After so many false starts, Wells and his developer partner Pat Eason are making sure that house construction will actually begin. This time, the project will be funded with only private investments, including some of Wells's own money.
This is partly because, after an extended period of time where banks were eager to lend to anyone, they have reversed course.
"Unfortunately, I think it's a sign of the times, unless these banks loosen up their wheels," Wells said.
Wells and Johnson, who have been friends and partners since Johnson sold Wells's house for him, are happy to be back to work. And they're wiser now, too.
"This time we'll save the cigars for when the houses are built," Wells said.
"When we break ground," Johnson countered.
"No, I'm smoking it when the houses are sold," Wells replied.
"No, that's the second one we smoke on the cruise ship," Johnson said.
'Buyers Are A Lot More Receptive'
Jennie Stabile has been a developer for decades, building single-family homes and condominiums up and down the San Fernando Valley. In 2004 she started developing her first tract of homes, in east Lancaster.
"I felt it was a new Valley; I loved it," Stabile said. "Coming here was a good opportunity to build the house I wanted."
Stabile planned to focus on three things when designing her tract--energy efficiency, solar power and green design. But she wasn't the only developer asking the city of Lancaster to push through building permits. Between 2,500 and 3,000 houses were being built each year in the Antelope Valley at the height of the boom.
"It was difficult, difficult, difficult from day one," Stabile said. "Everybody was building, the city was busy, the builders were busy, the engineers were busy. It was awful. I kind of got stuck in the middle. If I could have finished when I wanted, I would have been out of here, gone two years ago. But the fact that everybody was so busy, I never got my approvals expedited at all. So I got stuck."
Stabile got caught in the dust of the boom, and by the time she started building, the housing market in the Antelope Valley was already turning downward. Stabile said she had no other choice but to push through if she wanted to sell the homes.
The open house for Stabile's development, O Bel Sole! Estates, was in November 2007. She expected to have the entire tract of 41 homes sold by the end of 2008, but today there are still 24 empty lots. Prices for the homes, which are between 2,800 and 3,500 square feet, opened at around $500,000. Today they are $150,000 lower.
But Stabile is feeling better now than she was six months ago, when, in her mind, the market was at its worst. Now, prospective buyers are willing to hang around and talk about monthly payments after touring the model homes.
Instead, as is the case for Mike Wells, it is the banks that are now giving Stabile fits.
"Getting a buyer qualified is harder than building the house," Stabile said. "This environment is terrible, terrible. It's taken months to close an escrow."
Even pre-approved buyers with rock-solid credit take between 60-90 days to get qualified for a loan, and the amount of paperwork required can almost be measured in feet. Banks have required Stabile's clients to pay off any and all credit card bills, even if it's a $33 charge on a Target card.
"The housing industry would be going crazy right now, if the banks would be lending like they normally would," Stabile said.
Despite the delays banks are causing, Stabile expects to have the remaining 24 lots sold in the next six months. Four are already in various stages of closing, and construction on the new houses will begin soon.
"The activity and people's attitudes are totally different now," Stabile said. Prices are rising, too. Stabile raised prices by $10,000 at the end of April, and expects they will go up another $100,000 before the last house is sold.
New owners who moved in at the depths of the bust, like Mira El Lindsey and her husband, Richard, purchased a home from Stabile specifically because of her three-pronged environmental approach.
"What even drew us in to look at these homes was the solar energy, the environmental things, because we're very interested in that," Lindsey said. "And we thought these homes were just better than anything else we had looked at, and very affordable."
Stabile may have entered the Antelope Valley housing market at the wrong time, but she's made it out the other side intact. She is also the first tract developer in the Antelope Valley who is placing such a strong emphasis on environmental consciousness, green building techniques and solar energy. Current homeowners have reported electric bills of less than a dollar.
Considering that Stabile dreamed up her green home plans five years ago, she looks especially prescient today. National homebuilder KB Homes is set to debut a prototype home wired with solar power this summer in Lancaster.
Stabile designed the home she wanted, and buyers have responded.
"When I decided to build the tract of single-family homes, I wanted them to be up-to-date, special, and have the latest amenities available on the market," Stabile said. "I just started putting together something I thought I wanted."
'What Is The Consumer Really Demanding?'
Brian Ludicke, Lancaster's planning director, has worked in the department since 1984 and has been director since 2001. He's ridden the housing wave all the way up and back down.
Single-family homes were almost the sole source of new residential construction during the boom, and Ludicke doesn't think that singular focus will remain forever.
"I think one of the stories we're going to have to watch coming out of the recession is what's really the demand?" Ludicke said. "What is the consumer really asking for out there?"
Lancaster is in the middle of rejuvenating its downtown area, and developers are beginning to build there--like the new 22 lofts that are all occupied today. The city's newest general plan, which was adopted last July, calls for 1500 acres of mixed-use development to facilitate denser housing.
Ludicke said he imagines this idea of mixed-use development and denser housing in an area otherwise accustomed to sprawl as part of a different Lancaster and a greater Antelope Valley than today, a place that is more economical and environmentally sustainable.
"That's the future that I kind of see coming. It's not the one the city would have envisioned in 2004," he said.
Wells and Johnson, at least, could adapt to such a future. Wells builds commercial developments in addition to homes, and right now he's beginning a project in Kansas. For Johnson, what matters most at the end of the day is the essential act of a real estate agent.
"This is too much fun," Johnson said. "I just love handing keys to clients saying, 'Here is your new house.'"
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