New construction is one facet of the real estate industry that's been hit particularly hard by the market downturn. Builders have had to respond to low interest by slashing prices. The big question is: how low can it go?
Back in 2005, the new construction scene in the Fox Valley was looking bright. New home starts were riding an all-time high and new subdivisions were popping up everywhere to provide for the seemingly endless stream of buyers. In early 2006 it all came crashing down. Buyers disappeared like fog in the morning and builders were left to deal with half-finished communities, a glut of inventory and a ton of unfulfilled expectations. Since then, builders have had to respond and deal with the housing crisis. This has created some great deals for home buyers but there have also been some casualties.
In October 2007, the real estate world was shocked with the announcement of bankruptcy filed by Warrenville-based Neumann Homes. One of the area's largest builders, Neumann Homes had constructed 15 subdivisions including the popular Tanner Trails subdivision in North Aurora. Due to lagging home sales in our area and even worse conditions in Michigan and Florida, two other areas where the builder had developments, the builder was forced to seek bankruptcy protection.
Later, in April of 2008, a second large Chicagoland builder – Kimball Hill Homes – announced that it was also seeking Chapter 11 bankruptcy protection in order to restructure debt. The company is continuing normal business operations for the time being but it's unknown how this will affect new subdivisions such as Settler's Ridge in Sugar Grove in the future.
What buyers are finding in today's market are builders that are stretched as thin as possible on profit margins. This, right now, represents a high mark in new construction affordability. Over the last year, builders have been falling over themselves to offer incentives enough to spur buyers into action. Right now represents perhaps the best time over the last 50 years for home buyers to get into a new home. According to many experts, the housing market, especially in the new construction arena, has hit bottom. While we might not recover quickly, we're not expected to get much worse. This means that if you are in the position to buy, now is your chance to get in on historic low prices.
Buyers with homes to sell must make sure that their homes are priced aggressively right from the start. If you must put down a deposit on a new home before yours is sold, you need to be aggressive in selling your home right from the beginning. Contact your local real estate agent for information on how to price your home correctly in today's market. If you are not agressive enough with your home pricing, you run the risk of not getting your home sold before your new home is built. Some builders will offer a home-sale contingency that allows buyers to get out of the deal and get their deposit back if their home doesn't sell, but many builders are also not allowing this due to the bad market conditions.
Eric Rogers is a local real estate expert working in the Fox Valley area of Illinois. Eric works with home buyers and sellers in local communities such as Tanner Trails and other North Aurora real estate.
