Shovels, saws heard in Village I

After two years of virtual silence, construction sounds reverberated through Modesto's Village I neighborhoods this week.

Stockton-based FCB Homes has identified what it believes is a financial window of opportunity to build homes there at a profit.

FCB purchased formerly foreclosed Village I finished lots at a bargain price in the fall.

Now that Modesto is lowering some of its building fees, the developer is scurrying to start 24 houses before costly new California construction standards kick in Jan. 1.

"We're so excited about this project," said Tracy Williams, FCB's vice president for sales and marketing. "We're very pleased with how nice that location is."

Village I, on Modesto's northeast edge, had been the city's primary growth region. Thousands of homes were built there from 1995 through 2006. Then the housing bubble burst. and construction quickly faded. By summer 2008, about every Village I subdivision was shut down or abandoned.

Several got foreclosed, sticking banks with millions in unpaid construction loans.

That was the case with Graham Estates.

Building on those 24 lots on Sharon Avenue, Aristides Drive and Banyan Tree Court was planned by VCI Construction.

A bust but ready to go

But the project went belly up two years ago, leaving ready-to-build-on lots, including finished streets, curbs, gutters, sidewalks and utilities.

That failed development defaulted on its more than $1 million loan with Stockton's Delta National Bank. That foreclosure "was one of the largest hits the bank has taken in its history," Delta's President Warren Wegge told The Bee during the winter.

Delta resold the repossessed lots to Stockton's Frontier Land Cos., which does business as FCB Homes, for about $28,500 each. At the peak of the building boom, by contrast, Village I's raw land cost as much as $92,500 per lot -- not counting the price of any improvements.

Williams said the lowered lot cost "allows us to build there and still compete with (resale homes) in the surrounding neighborhood."

Lowered city impact fees make the project more financially feasible.

Modesto's City Council voted in June to reduce the capital facilities fee it charges each new home by 16 percent, dropping it from $21,670 to $18,135. The fee reduction is effective Sunday.

That $3,535 per home savings "definitely was something we took into consideration," Wil- liams said.

California's $10,000 state income tax credit for new home buyers also should help lure customers, according to Williams. The credit is available to all home buyers, as long as they make the new home their primary residence.

While that credit may make home buying more affordable, it remains a tough market. Five years ago, many Village I homes were priced at $500,000 or more.

Now the median resale price in the region's 95355 ZIP code is about $175,000. The sales price per square foot there averaged just $99 in June.

Graham Estates will offer four floorplans, ranging from 1,634 to 2,446 square feet.

"We're working on the pricing right now," Williams said. The starting base price "probably will be about $240,000."

That would work out to a base price of about $147 per square foot, and that's before the homeowner chooses any upgrades.

Convincing buyers to pay that much more for a never-lived-in home will be FCB's challenge.

Waiting for the region's housing market to recover, however, poses its own problems.

Trying to beat the clock

Stringent state building codes take effect Jan. 1. That includes a requirement that new homes be equipped with fire sprinkler systems, like commercial buildings.