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Chenal Valley Experiences Glut of Lots

4 min read

(To see a map of the Chenal properties, click here.)

If Deltic Timber Corp. officials needed more convincing that the upscale housing market was slowing down in west Little Rock, they got it on Sept. 25.

Deltic’s Chenal Properties subsidiary opened lot sales in its 31st neighborhood, with prices averaging about $90,000. The opening of Accadia Court attracted only one buyer.

"The outcome was dismal," said one Chenal Valley veteran.

The poor showing pushed the inventory of Deltic’s unsold residential lots in west Little Rock to more than 175 spread across a dozen neighborhoods. That tally doesn’t include scores of undeveloped lots owned by homebuilders, speculators and would-be residents.

Not so long ago, most of the 32 lots in the Accadia Court neighborhood would have sold or gone under contract on the opening day. But more than three years have passed since Deltic issued a press release proclaiming a successful offering of residential lots.

The phone calls from interested buyers were all but non-existent for the Accadia Court lots, averaging 0.6-acre in size with minimum building requirements starting at 2,600 SF for one-level homes and 3,000 for multi-levels.

"I’m surprised they sold one [lot]," said Jim Miles, co-owner of Chenal Valley Construction Inc.

Officials at Chenal Properties declined comment but indicated there were no plans to roll out any more new lots any time soon.

The cold reception to Accadia Courts wasn’t the first one for a new Chenal Valley neighborhood either.

Varennes Court, Chenal’s ultra-upscale neighborhood, is home to only one sale since opening in June 2005. That $335,000 purchase of a 1.2-acre lot by Alonzo and Susan Williams closed back in January 2006.

The sticker price on the remaining 20 home sites ranges from $255,000 for a 1.2-acre lot to a whopping $655,000 for a 2.2-acre site overlooking Chenal Valley Country Club’s Bear Den Course. And it’s not just the top-end lots that are backing up.

The largest block of unsold Chenal Valley lots, at 45, is in Epernay Place, which opened its second phase in August 2005 in the far northwest corner of Deltic’s development.

Prices range from $49,400 to $57,400 on sites with minimum requirements of 1,800 SF on single-story homes and 2,200 SF on multi-level houses.

‘They Got Greedy’

Deltic once kept a tight throttle on the flow of residential lots, allowing the supply of lots to dwindle and demand to rebuild before opening new neighborhoods.

But that practice began to change after Ray Dillon was named president and CEO in July 2003. The development schedule for the 4,800-acre project was accelerated, and Deltic became less selective about its homebuilding corps.

The luster of exclusivity gave way to pumping up the sales volume and opening up the party to more players. But as the real estate market cooled, some of the new Chenal Valley builders didn’t have the financial staying power to endure.

"They attracted a lot of Johnny-come-latelies who were speculating, and some didn’t do well," said Miles of Chenal Valley Construction.

Newly built homes in foreclosure began to sprinkle the landscape, and solvent homebuilders went into defense mode as the inventory of undeveloped lots continued to grow.

Deltic rolled out 48 lots in the first phase of OrlÉ in October 2005, and 27 remain unsold. The lots range from $131,900 for a 0.4-acre site to $171,900 for a nearly 0.6-acre site.

Fifteen of the 33 lots are unsold in the first phase of Hallen Court, which also opened in October 2005. The price list in this patio/garden home neighborhood ranges from $98,000 for a 0.24-acre site to $166,000 for a 0.4-acre site.

"In my opinion, they have the prices too high, and they’re putting the lots out too fast," Miles said. "I think they got greedy."

Vanishing Spec Market

Deltic has had to loosen its control over the commission structure for lot sales in Chenal Valley in hopes of attracting more sales. The once written-in-stone 1 percent payout to an outside real estate agent has given way to 2 to 4 percent, depending on the cost of the lot.

Four percent is considered the normal cut for an agent bringing a buyer to the table on an undeveloped residential lot.

"They have had to get more realistic," said one residential seller of the change.

Bret Franks Construction Inc. is sitting on only one Chenal Valley holding and it’s a big one: a 6,300-SF speculative home at the entryway to Chenal Valley’s Deauville Place. All told, the now $900,000 property has spent more than 855 days on the market since construction began.

"That was the last big spec house we did," said Bret Franks, president of his namesake homebuilding firm. "It was a gamble. The spec market is gone.

"Chenal is not our bread and butter, but we love building houses out there."

Kathy Edwards, president of Edwards Custom Homes Inc., wondered how Accadia Court would fare when she received the sales flyer in advance of its opening last month.

"I was kind of surprised they added that, but they are beautiful lots," said Edwards, who lives in Hallen Court.

Her company is holding only one Chenal Valley lot, and she has adopted a conservative stance for now, focusing on pre-sold homes.

"We’re waiting to see what happens with the mortgage market," Edwards said. "I’m working with two couples looking for a site. People are still driving around and looking daily, but everyone is waiting to see what will happen with the markets and economy."

The president of Graham Smith Construction LLC has abandoned the high-end home market in favor of less risky territory.

"I think it’s going to get a lot worse," said Little Rock homebuilder Graham Smith. "A lot of it is just liquidity. Banks are cutting lines of credit off, and that’s making it a lot tougher."

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