CHICAGO AREA NEW HOME BUILDERS TO DRASTICALLY SCALE BACK PLANS FOR 2009!
PROJECTED HIGH UNEMPLOYMENT, UNCERTAIN CREDIT MARKETS, HIGH FOR-SALE INVENTORY AND SKYROCKETING FORECLOSURES WILL TEMPER NEW PROJECTS NEXT YEAR!
While the sales of existing homes has tumbled nearly 15% here in the Chicago area within the past year, many home builders here have seen their own sales fall by 50%, or more!
During the Third Quarter, 2008, buyers in Ryland Homes communities peppered throughout the area backed out of 40% of sales contracts written. The national builder is debating whether to lower its home prices further, and offer greater buyer incentives, or just pull out of some markets altogether, including Chicago.
Builder Pulte Homes, with many new and newer subdivisions spanning a ring of suburbs around Chicago, feels the housing market may not reach a bottom for "some time." It is looking to modify its credit agreements with its lenders.
Local builder Montalbano Homes opened half a dozen new communities in the Chicago Metro Area in late 2007, but has no new projects planned for 2009. It's number of spec homes, or completed homes available for fast delivery, has dropped from 72 over the past year to 20 currently. "We had to give a lot of them away to sell them," said Division President Pete Balistreri. "We're trying to get lean like everybody else."
At regional builder Lakewood Homes, President Buz Hoffman expects continued losses in 2009. Recently, his firm turned back three incomplete projects - in suburban Plainfield, Newark, and Barrington - back to the lender, using a "Deed in Lieu" to stave off likely foreclosure.
"It cleans up the balance sheet, which is extremely important these days," Hoffman said.
In the coming year, it plans to renegotiate all of its loans with its banks, in an attempt to buy more time until the Real Estate Market rebounds - "likely not for some time", says Hoffman.
City of Chicago Developer The Belgravia Group has several under-construction projects in or near Downtown Chicago - 565 Quincy, Union Row, and 600 N. Lake Shore Drive. President Alan Lev say he had a stronger Third Quarter, 2008 than the previous two quarters, but he projects the Fourth Quarter to be weak. His firm still has options on a few new projects, but Lev said the company "won't do them until the world turns around. It'll be a year, two years, before you see anything new get off the ground in the city."
In the meanwhile, while the Chicago Real Estate Market in many communities continues to languish, builders attempt to reduce construction costs to reduce expenses, as well as make them more affordable to a wider range of potential buyers. They are building smaller homes, with fewer available upgrades, and less expensive design elements, despite the fact that upgrades themselves are highly profitable.
Said Chad Dreier, Chairman and Chief Executive Officer for Ryland Homes, "We're trying to take what you'd call the sexy stuff out of the house."
For more info, read Mary Ellen Podmolik's article in the Chicago Tribune from last Friday, November 7th.
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