Lyons Homes stops building in Modesto Village I subdivision

314 homes were planned, but developer can't sell what's there

June 10, 2008 

The signs are painted over. The models are empty. All building has stopped at the three Falling Leaf subdivisions in Modesto's Village I.

With less than half of the planned 314 homes complete, developer William Lyon Homes has quit construction. Empty lots growing weeds remain.

Falling Leaf apparently is the latest victim of the housing market downturn plaguing the Northern San Joaquin Valley.

When the development opened in spring 2006 in northeast Modesto, it was highly praised for its innovative use of space and alternative housing designs.

Its small lots, garages with alley access, clustered driveways and "granny flats" were hailed as creative ways to provide more affordable housing in a higher-density setting.

But it opened just after the region's housing market peaked and the builder struggled to find buyers.

Falling Leaf repeatedly cut prices. Example: Its smallest house, a 1,620-square-foot plan, was priced at $379,000 in August 2006, then dropped to $329,990 by February 2007 and dropped again to $269,900 in April 2007.

By last month, the development drastically sliced prices on its remaining inventory to about $100 per square foot. One 3,545-square-foot house with six bedrooms, four bathrooms, granite counters, stainless steel appliances and maple cabinets was advertised for $359,681.

No houses are for sale now.

The three sets of Falling Leaf model homes -- at The Groves, The Trails and The Meadows -- are closed. There's a note on one sales office door saying "We are temporarily sold out." The Web site for Falling Leaf, meanwhile, has disappeared.

No one at William Lyon Homes' headquarters in San Ramon would return The Bee's calls Monday and a receptionist said the builder had no comment.

In March, the developer asked the Modesto Planning Commission to extend its subdivision vesting rights and the request was granted. That means Falling Leaf was given until Jan. 19 to complete construction or risk having its city building fees increased.

Increased building fees can kill a development, warned builder Neil Grevemberg, who owns an eight-lot subdivision off Fine Avenue across from Falling Leaf. He said his Cambrooke Court subdivision lost its vesting rights, and the city wants more than $52,000 per house in fees.

With the higher fees and the dramatically slowed demand for housing, Grevemberg said his project is "losing big money." The lots cost him about $200,000 each, but he said they now are worth only about $50,000 each.

"I don't know what we're going to do," said Grevemberg, whose company is called GP Land Investment. "They might sit there for 100 years."

Owners of another small development off Fine Avenue also are debating whether their project is fiscally viable. VCI Construction was planning to build 24 homes in Graham Estates at Sharon and Fine across from Falling Leaf.

"They're doing some financial calculations to see if it still makes sense to build," said Marc Lundberg, a Century 21 M&M and Associates real estate agent who represents the builders.

"They're having discussions on whether the market would be right for homes priced at what they need to make it work."

Bee staff writer J.N. Sbranti can be reached at or 578-2196.

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