As a typical housing decline moves forward, builders begin to pull back, sometimes abandoning half built subdivisions.
This happened in the early 1990s housing bust and certainly in the early 1980s when a combination of heavy job losses, prime interest rates above 20% brought the new housing industry to a virtual standstill. The current housing downturn is no exception.
A recent report on loudounstats regarding the pull out of KB Homes from the Martin's Chase subdivision brings a warning new home buyers should heed.
Purchasing a new home in a a new subdivision during a housing downtown carries heavier risks than buying cheaper, resale homes in established neighborhoods.
Consider:
- A new home builder may go bankrupt or simply shut down building in a subdivision.
- Bankrupt builders do not build promised amenities such as pools, clubhouses, parks.
- Years could go by with empty lots, giving an unfinished feel to the neighborhood.
- HOA fees are likely to be higher with fewer homeowners paying into the general fund.
Martin's Chase is located within the Loudoun County transition zone in a rural area. It is reached by a narrow road off Ryan Road through what appears to be another subdivision. There are no neighborhood schools or commercial districts to add value in coming years.
Resellers will have to compete with new builders and will be challenged to gain much appreciation due to the location of this development. Martin's Chase's prices are almost certain to decline lower than similar houses within nearby Brambleton which has built amenities such as parks, schools and a new commercial district.
While builders have been doing what is in their best interest (lowering prices by $100-200K and abandoning half built subdivisions) over the last year, such actions do not build a positive reputation with buyers and hurt resale values of homes whose owners who are unfortunate to be left holding the bag.
