9 housing projects on hold in Queen Creek

At least nine housing developments in Queen Creek have stalled since the beginning of 2008, and those are only the difficulties the town knows about as a result of the past year's recession.

"As you might expect, there's a lot of projects that are on hold right now," said Tom Condit, Queen Creek's community development director. "We're sort of waiting this out like a lot of municipalities. Developers don't have to tell the town they're halting construction, Condit said, but the town does get indications when permits lapse or when properties change ownership.

The first sign of the building slowdown in Queen Creek was when TOUSA, the parent company of Engle Homes, filed for Chapter 11 bankruptcy protection in January. Shortly afterward, signs of work stopped on the 113 homes the builder had intended to construct in phase three of the Sossaman Estates subdivision.

Since then, it's been maybe one or two developments every month or two saying they're changing plans or changing ownership, Condit said.

At this point, Charleston Estates, La Sentiero, Lucia and Villago have indicated they are on hold indefinitely, Condit said. Santo Vallarta allowed a construction assurance to expire and the builder of Remington Heights has let an option lapse on phase four of that project.

Pegasus Estates, which is sometimes referred to as Bellero and is not associated with the nearby Pegasus Airpark, has moved a sales trailer off its land and indicated to the town that project was on hold, Condit said.

The town is also keeping an eye on Paseo de Pecans, which hasn't shown signs of building activity since the developer pulled encroachment permits with the city in April, Condit said.

One big effect low development numbers bring to Queen Creek is a hit to the pocketbook. Each home permit brings about $5,000 into the General Fund and another $15,500 in development fees, said assistant town manager Patrick Flynn.

The town is averaging between 12 and 25 single-family home permits a month, Condit said. Several companies are continuing to build and sell in a dozen or so subdivisions in town, even though many are scaling back their projections for the coming months.

"I think some developers are poised to weather this storm," Condit said. "They're just expecting a slow season."

Queen Creek scaled back its own projections for housing permits this year, expecting 300 this year instead of the 1,200 to 1,700 in previous years, said Flynn.

Even with that lower projection, the town is on track to get 240 permits this year, or 60 below projections, he said. So that's a projected loss of about $300,000 to the General Fund and $1 million in the development fund, Flynn said.

However, higher-than-expected sales tax revenue from new stores is currently making up for that projected shortfall, so the town isn't in danger of needing to make more budget cuts, Flynn said.

And others are staying optimistic about the area.

"We're still bullish long-term on Phoenix," said Jeff Carlson, owner of opportunity investment group ParCap LLC. "The southeast Valley has always been my favorite sub-market." And that's a big reason Carlson's company bought 283 lots in the La Sentiero subdivision from KB Homes and 135 lots in Villago from Nicholas Homes earlier this year.

The lots are finished but construction hasn't started. Carlson's game plan is to keep those areas maintained and clean - allowing only enough weeds on each lot to keep dust down - until the market comes back. At that point, he'll find a developer who wants to finish the projects.

"The market today really is all about foreclosures. That really is what's selling," Carlson said. "Our sense is we've got to burn through the foreclosures over the next 12 to 18 months before we have a true homebuilding economy at this point."

However, when the market is ready for homebuilding again, Carlson expects areas close to central Phoenix and the southeast Valley to be the first to come back.

With so little land left in Tempe and Chandler, Queen Creek's not an outlying area anymore, he said. And things like the Loop 202 Santan Freeway opening and Williams Gateway Airport growing make the area even more attractive for the investor.

Carlson said most investors are looking at a two- to five-year horizon for the market to really come back. He hopes he's wrong, but adds, "hope's not really a strategy."