Housing Woes in Atherton

This is how someone’s dream home becomes a $6 million nightmare…

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If you live in the area you will recognize this house in Atherton that has been under construction for about 3 years, the last 12 months at more or less a full stop. If I recall correctly the previous house was purchased between 4-5 years ago (pretty much the absolute peak of the market so it was at least a $3.5 million price tag) and the house was promptly torn down and the lot sat vacant for another year and a half.

When construction started it was an epic affair with a lot of excavation for a full basement and pool with the requisite separate pool house and probably a combo guest house. It’s tough to tell from the picture I took but this house is massive, probably a combined square footage of 10,000 if not more. This is a big house.

Construction was in full swing and then it simply stopped, the green fence went up and everybody went home. At that time it wasn’t even stucco’ed, just wrapped in Tyvek with a roof on… I think the town of Atherton made the owner put a stucco “scratch coat” on as it was close to achieving blight status on what is a pretty busy street.

I talked with a contractor who works in the area and what he said is that Atherton is now requiring groundwater reclamation systems but it’s a new thing and there is a lot of confusion about how to build them. The owner put in a system consisting of a big underground tank and a bunch of other parts (getting technical!) but it wasn’t engineered properly according to the town and on top of this the basement flooded so the owner was faced with an additional $500k of expense to tear out the system already in place and retrofit a new system that would meet requirements and work properly. I don’t know how accurate this is but the contractor is one of a dozen or so companies that primarily work on multi-year housing projects so if anyone would know it would be my source.

Did I mention that this was right about the time that the economy tanked and the floor fell out of housing and then credit markets seized up?

So here it sits, probably $6 million tied up in a house that is far from complete in a market that can’t possibly recover the sunk cost and construction financing practically non-existent. I take no pleasure in writing this and only do so because it is a very tangible example of how a complex regulatory environment and an uncertain economy can conspire to hurt anyone. I really feel bad for the owner(s), if it were me I don’t think I could ever drive down that street again without my stomach turning inside out.

BTW, 2 blocks down the road from this one is another home that is completed minus landscaping that has never been occupied that is now on the market and if you stand in that driveway and throw a stone you could hit 15 for sale signs. I keep hearing about how the economy is out of recession and growing again but when you see this many for sale signs in Atherton, California you know something isn’t right.