The housing market and the broader economy are beyond scary right now, and one homebuilder's efforts to react to that fact are scaring the new residents of one Gilbert neighborhood even more.
Sales at Fulton Homes' Freeman Farms project, at Ocotillo and Greenfield roads, have ground to a halt as buyers find credit has dried up for the $400,000-plus houses that the builder has been trying to sell there since 2006.
Forty of the 761 lots in the development have been sold, Fulton Homes President Norm Nichols said Friday, and he'll be lucky to break even on it in the end. "Right now Freeman Farms is a loss, and it's getting worse every month," he said.
His solution, in the works since January, is to get town approval to build lower-priced models on the empty lots, a possibility homebuyers who closed on their houses this year say they wish they'd known about.
"It would have been a deal-breaker for us," said Megan Foster, who moved into Freeman Farms with her fiance this summer. "We were sold on this property because of the way it looked, being a part of the neighborhood, the whole look, and it's all changing."
She and many other Freeman Farms residents would be next door or across the street from the cheaper houses, where vacant lots now sit. "I feel like the little house on the prairie," said Mitchell Reibel, who moved into Freeman Farms from New Jersey earlier this month.
They aren't little houses - they have four to eight bedrooms and three-car garages. They also have features and architectural details that may not appear in the next houses to go in. Ceilings will be lower, windows will be smaller, and other features that were standard will be optional on the new houses, factors some fear will adversely affect already depressed home values in the development.
"All that I know is that a 48-inch window versus a 72-inch window is a lower-quality product," said Harold Horn, Foster's fiance.
Fulton Homes hosted a meeting for Freeman Farms residents on Thursday, in advance of a Tuesday hearing where the builder will seek Town Council approval for changing the setbacks, or the distance allowed between the front of the house and the sidewalk.
It wasn't until notifications for this zoning case, which affects some of the new models the town's Design Review Board has already approved, that the residents learned about the possible change in the community.
Mike Zilles, who lives in the only house on his block with his wife and two children, said the day after the meeting, "If I take them at their word I feel a whole lot better, but the proof is in the pudding, so to speak."
He said he's already underwater in the $430,000 house they moved into at the end of May, because the base price of his model was cut by $65,000 four days after he closed on the house.
Nichols said buyers who moved in this year weren't told about the new models because he hadn't ruled out the possibility of building more of the higher-priced models if the market for them came back, and he still hasn't.
He still hasn't ruled it out, he said.
Nichols said that new models have the same square footage as houses already built in Freeman Farms, with four to eight bedrooms and three-car garages. They will have lower ceilings, and many of the features that were standard will become options, to keep the base price down.
"We're starting to find the price point where people are starting to buy again, and that's about $100,000 less than what (recent buyers) paid," he said.
Zilles said Nichols didn't convince him that the market has changed so dramatically. "He said 75 percent of the homes sold in Gilbert in the last 60 days were $350,000 or less, but that's what they always are," Zilles said.
Others don't want to watch the area suffer long-term because of a few bad decisions early on.
"They didn't plan enough for the market to drop, and that shouldn't affect how to build a community," Jan Reibel said.
Nichols said he's trying to protect home values in Freeman Farms and other partially built Fulton communities across the Valley, along with the company's own investment, by getting the lots filled, somehow. He said Fulton Homes has already put in $80 million of infrastructure into Freeman Farms, which has a few blocks with signs and streetlights, but no houses.
He said Fulton Homes can't just ride the market out a few years and hope the market for $400,000 houses will come back.
"We're looking for the light at the end of the tunnel, but we haven't seen it yet," he said.