Housing slump means end of line for Chicago builder

Housing slump means end of line for Chicago builder

by Dan

The sluggish housing market has claimed another high-profile victim. This time, it’s Neumann Homes in suburban Chicago, a residential developer that builds homes in Illinois, Wisconsin and Colorado.



The builder late in the day on Oct. 22 faxed press releases to several Chicago newspapers announcing that it had defaulted on its credit facilities and was preparing to file Chapter 11 bankruptcy. The company has already laid off most of its employees and has closed all of its sales and production offices.



According to Crain’s Chicago Business, Neumann has 15 residential subdivisions in various stages of construction in Illinois. The company said it is seeking funding from its lenders to help complete homes already under construction. The press release also said that Neumann will ask the bankruptcy court to allow it to refund earnest money deposits to consumers whose homes are not yet under construction.



In the release, Neumann president Ken Neumann pointed to the “significant downturn” in the housing markets in Chicago, Detroit and Colorado for his company’s demise.



This is no small-fry homebuilder. Neumann Homes has been around since 1980 and, according to its Web site, has been building from 90 to 100 homes every year since the middle of that decade. The company sold more than 1,800 homes in 2005. The Chicago Sun-Times recently ranked Neumann Homes as the ninth-largest Chicago-area homebuilder in 2006 by volume. It had sold $231.2 million worth of homes that year according to the Chicago newspaper.



Neumann’s bankruptcy filing is just more evidence of a residential real estate market that isn’t turning around any time soon. Defenders of residential real estate’s strength routinely pointed to the Midwest as an area of stability when it came to the housing market. It was always the East and West coasts that they claimed had the most severe market swings.



Neumann, though, served the Midwest. It had nothing to do with the coasts. This real estate slump isn’t confined to the coasts. It’s impacting everyone.