Unneighborly Feelings

By Jennifer Hiller - San Antonio Express-News November 14, 2008

Residents of a new suburban community are fuming over their builder's decision to add smaller, lower-priced homes to their neighborhood now that the economy has taken a turn for the worse.

Homeowners in KB Home's Sundance Trails and Sundance Ridge communities, located off Potranco Road outside Loop 1604, say the cheaper homes will bring down their property values and ruin the aesthetics of the neighborhood.

In down markets, builders in incomplete neighborhoods often face the choice of stopping construction, selling off vacant lots or offering lower-priced products.

While San Antonio remains one of the healthiest markets in the county, the longer the national housing malaise continues, the less insulated the city becomes.

This weekend, Sundance residents plan to picket near the entrance of Sundance Trails. They also have created a Web site - www.sundancefamily.com.

The owners purchased brick-fronted homes with two- to three-car garages, priced starting around $125,000 and going up into the $200,000s.

But a new collection of smaller homes will have a starting price of $93,995, sizes beginning at 1,265 square feet and will have an option for a siding front instead of brick.

Builder KB Home said the decision was based on economic conditions and a drop in buyer demand for larger homes in the area.

"We look at the marketplace," said Carlos Contreras, local government affairs director for KB Home. "We have to adjust to it."

KB Home has built about 140 homes in the Sundance neighborhoods, which have 400 lots combined. The adjacent neighborhoods share a community center, pool, fitness center, playground and other amenities such as walking trails.

Homeowners worry the lower-priced homes will erode property values and lead to a neighborhood filled with rentals. When they want to sell their homes, owners say potential buyers will bypass their neighborhood in favor of others.

"We are all in the same situation," said resident Samuel Metz, who moved to Sundance Trail in June. "Nobody will want to buy the real high-end nice homes."

KB Home likely isn't the only builder in the San Antonio area swapping out product lines or buyer options in favor of something more affordable.

John Flournoy, managing broker of the Phyllis Browning Co., said the situation isn't widespread now, but has happened in the past during slow markets.

"When builders are trying to clear out inventory, they will do whatever it takes," Flournoy said.

Many builders have been offering incentives and price breaks. Some have stopped construction midway through a neighborhood.

Standard Pacific Homes announced earlier this year that it would exit the San Antonio market, leaving behind 2,500 vacant lots in 15 local subdivisions.

And for all builders, plans to break ground on new neighborhoods have skidded to a halt.

"They've going to have to adjust the product to the market as they see fit," said Wendle Davis of the real estate consulting firm SA Research Corp. "I'm sure they would rather be selling $150,000 homes there. It's probably a matter of survival."

Contreras, who spoke to about 100 residents of the Sundance communities Wednesday night, said customer surveys have shown home buyers want an option for smaller homes with fewer garage spaces, Contreras said.

He said that KB wants to have a successful, completed neighborhood and that most of the new homes with one-car garages won't be on the same streets as homes with two-car garages.

"We have similar goals," Contreras said.

A KB Home spokeswoman said Thursday that the new homes will be built to EnergyStar standards.

But homeowners said the builder isn't considering the impact on them.

"How would you feel if they built that ugly house in your neighborhood?" resident Nikki Nuñez asked Contreras.

Contreras responded that KB Home does not build ugly houses.

Residents grew more upset Wednesday after Contreras said the decision to build the smaller homes was made five or six months ago - before many of the newer residents bought their homes - but didn't make the decision public until a few weeks ago.

In addition to the picketing and Web site, residents Wednesday also floated ideas such as a letter-writing campaign and having everyone put a "for sale by owner" sign in their front yard with a phone number that will lead callers to a recording about the conflict.

"It's going to take the effort of everyone in the community," resident Jennifer Czuhajewski said. Real estate agents say the community has reason for concern. Ronald "Alan" Chapman of Sterling Group Realty said buyers often avoid neighborhoods with one-car garages.

"It affects salability," he said.

And the conflict in the Sundance neighborhoods is an example of the risk of purchasing in a new neighborhood.

"You never know what you're going to get with a new house," said Joe Wrzesinski with Keller Williams Realty.

But Davis of SA Research doesn't think investors are looking to purchase new homes for rentals now. A previous influx of investors into the market in 2005 and 2006 means San Antonio already has plenty of rental homes, he said.

Resident Emonty Means said he doesn't want to stick around to find out if Davis is right. He moved a year ago from a neighborhood where crime rose over a two-year period as investors converted smaller homes to rentals.

"I don't care what they say," Means said. "I'm moving."