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By William Sluis | TRIBUNE REPORTER

January 18, 2008

Improvement in housing market could mean an end to discounts

For those who believe that housing is going to stage a turnaround, the next month may be a last chance to get a home at a bargain price.

That's because, if the early spring selling season gets off to a strong start, incentives and discounts may soon be a thing of the past.

"There are signs that consumers are growing a bit more confident and that there is some pent-up demand for new homes," said Jack Sorenson, president of U.S. Shelter, based in Hoffman Estates.

Builders have offered discounts in part because land prices have fallen and because subcontractors, eager to obtain more work, have cut their prices, several of the builders said at a midwinter conference held by Sharon Windle Inc. in Schaumburg.

"Vendors are very hungry for business, because they don't want to cut staffs," said Bob Meyn, vice president for sales and marketing for Ryland Homes in East Dundee. "They have cut prices for drywall and other basics."

Lumber prices also have dropped, helping builders hold down prices. But the discounts may soon be over, especially if buying picks up, other builders said.

A recent focus group showed that home seekers think this is a good time to buy, but many are leery of selling an existing home, said Christopher Shaxted, executive vice president of Lakewood Homes in Hoffman Estates.

"Even with good credit, some buyers are reluctant," he said.

Several builders said they are cutting the size of a typical home by as much as 200 or 300 square feet, to prune costs. In some houses, living rooms are a thing of the past, while dining rooms are endangered. Many buyers would rather have a larger kitchen with a fancy breakfast area.

But rooms that can include a wide-screen television, such as an extra den or an upstairs family room, remain popular.

Many new houses include "green" features, particularly when it comes to better insulation and windows, as well as heating, cooling and ventilation units that save energy.

Some builders said they are redesigning townhouses, to make them more affordable. Multifamily housing is comprising a larger portion of the local market.

"We won't see any further lowering of prices," said Chris Naatz, vice president of sales and marketing for Pulte Homes/Dell Webb in Schaumburg.

Housing for buyers over age 55 has been one of the bright spots in the local housing scene, Naatz said, and no slowdown appears imminent in that category.

As for land prices, "in some cases, land is worth 40 percent less than it was a few years ago, and builders are eager to clear if off their books," said Andy Konovodoff, president of the Illinois division of Town & Country Homes in Lombard. That has helped to feed the discounting of new homes, he added.

Local builders have seen a slowdown before, but some became too optimistic after a 10-year boom, said Pat Curran, president of West Point Builders in Elgin. Now, he sees them as too downbeat.

"In 2005, builders were wildly optimistic, but now some are at the other extreme," he said.

Curran said he has been looking at buying some land, and is working with a consultant on how much West Point would need to charge for new housing there.

He said his company typically builds 60 to 100 houses a year, and sold 35 in 2007. He is hopeful of selling more than that over the next 12 months.

Overall housing starts in the Chicago area in 2007 fell to around 18,000, from more than 31,000 at a peak in 2005. Developers here sold about 21,000 houses last year.

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