Chicago area builders confident about new, streamlined market
BY SANDRA GUY Sun-Times Media August 16, 2012 3:44PM
Paul Bertsche (center) co-principal at CA Development Inc. says that building construction of new homes is picking up. Working on a new home with him is Ed Cozza (left) and Rod Zwier of Air-Rite Heating and Cooling on August 15, 2012 in Chicago.
Updated: September 18, 2012 6:15AM
After the beating they took through the housing market collapse, Chicago-area homebuilders say they are feeling better about their prospects, mirroring a national report Wednesday that showed builder confidence at a five-year high. Builders have upgraded offerings while slashing prices from pre-bubble levels and already are enjoying the payoff.
Aladdin Nassar, vice president of Meadowbrook Homes in Bolingbrook, said the 33-year-old homebuilder started seeing an uptick in home buying in October 2010 and the pace has picked up since.
Meadowbrook had to redesign its homes at the Arbor Lakes development in Minooka for a starting price of $169,000 — down from the previous $240,000 level — to compete with foreclosures and short sellers, said Nassar, son of company owner and architect Tawfik Nassar.
The lower starting price, along with hardwood floors, Energy Star construction and other free upgrades, combined with the village of Minooka’s homebuyers’ incentive to jump-start the market. The village and Meadowbrook offer a total of $10,000 cash at closing to all single-family home buyers under a stimulus program that extends to April 2013.
The homebuilder is building custom homes at locations where buyers specify and has sold five of those recently, in addition to a near-record nine homes in June in the Arbor Lakes development, which averages four a month.
Buyers aren’t interested in higher prices.
“We’re not making much (profit) but higher prices would hurt sales immediately,” Nassar said. “The trend is definitely up in volume, but not in price.”
Matt Dill, owner of Beechen & Dill Homes in Burr Ridge, said his company expects to sell 40 to 45 homes this year — as much as an 87.5 percent jump from the 24 homes sold in 2011.
“It is night and day (difference) than two years ago, absolutely,” said Dill, the son of company founder Jerry Dill.
Homebuyer traffic is up 30 percent from last year for the home builder’s two developments, Creekside Estates in Lockport and Misty Ridge in Romeoville.
Even the company’s new custom division, Summit Signature Homes, is seeing new interest in $1 million-plus houses in western suburbs such as Hinsdale and Clarendon Hills, Dill said.
“The sweet spot now is the low $200,000 price for the starter models — and that’s $80,000 lower, on average, than before the housing bust,” he said. “We had to figure out how to get a lower-priced home to market so the bank would look at it and say, ‘OK, that’s a fair loan,’ against the foreclosure market.”
The homebuyer’s lending market has loosened up, too, and is “substantially better” than a few years ago, he said.
Builder Paul Bertsche sees a perfect homebuyer’s market developing, with “unbelievable” and “almost free money” as lending rates hit historical lows (3.5 percent for a standard fixed 30-year mortgage), competitive housing prices, and a picked-over supply of foreclosed and short-sale properties that are undesirable leftovers.
“My glass is half full again,” said Bertsche, who with his wife, Wendy Andrews, is co-principal of Chicago-based CA Development, which has built more than 300 single-family homes in the Old Irving Park neighborhood in the past 15 years.
The National Association of Home Builders/Wells Fargo builder sentiment index released Wednesday rose two points this month to 37, up from 35 in July. That’s the highest reading since March 2007. Any reading below 50 indicates negative sentiment about the housing market. The index hasn’t reached that level since April 2006, the peak of the housing boom.
The index, which is based on responses from 478 builders, has been trending higher since October and dipped only once since January — suggesting a turnaround in housing is solidifying after years of stagnation.
Builders also reported seeing the best sales level since February 2007, according to a separate measure in the NAHB survey.
Builders’ outlook for sales in the next six months is at the highest level since March 2007. Turnout by prospective buyers, meanwhile, returned to levels not seen since May 2006.