And the march of sprawl to the mississppi continues.......

Home builders have big plans Development of thousands of area homes seen By Sharon Stangenes and John Handley, Tribune staff reporters. The Los Angeles Times contributed to this report Published December 7, 2004 Buoyed by strong sales and looking to keep the local housing boom rolling, Chicago-area builders plan to unleash a new round of suburban mega-developments to lure buyers in 2005. At least seven builders, alone or in partnership, are opening developments of 1,000 or more units in coming months. Several developments are planned for more than 2,000 homes. Some of the national builders operating in the Chicago market said they plan to boost 2005 sales by 20 to 30 percent or more. But the demand for more housing is not just coming from home shoppers. Rather, pressure from investors and analysts on Wall Street is helping to spur the massive developments. Wall Street "expects publicly held builders to show growth," said Robert Meyn, vice president of sales and marketing for Ryland Homes. Meanwhile, the pressures on the publicly traded companies are forcing local privately held builders to keep up. And there are concerns that the trend will create a housing bubble that eventually will burst. Centex Homes will announce four developments with a total of 6,000 homes in the next few months. The builder is planning projects of 2,000 houses apiece for the suburbs of Elwood and Yorkville. Ryland, Lennar and Concord Homes are teaming up to build 2,000 houses near Huntley. Kirk Homes plans developments of 1,000 or more homes in Lakemoor and Woodstock and 800 homes in Elburn. Lakewood Homes has received approval from Plano for the second phase of its Lakewood Springs development, pushing that project to 5,000 homes. Those builders join Cambridge Homes, which recently announced plans for a 2,600-home development in Pingree Grove, west of Elgin. Typical of the pressures facing builders is Cambridge parent D.R. Horton. The company has a pattern of relentless growth. Two years ago, D.R. Horton surpassed Wal-Mart's record of 99 consecutive quarters of earnings growth. It's now up to 108 and counting. Two months ago, it completed its 27th fiscal year of consistently higher profit. Its market value recently stood around $8.5 billion. D.R. Horton, based in a suburb of Ft. Worth, built fewer than 900 homes in 1992, the year it went public. In its just-completed fiscal year, it sold more than 45,000 homes, an industry record. Fears of a housing bubble are rampant in some quarters, although builders see little chance of one occurring here. A price bubble is starting to burst in Orange County, Calif., according to Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis. "Housing prices there are starting to fall. I don't expect that to happen in the Chicago area, but I do worry about a possible spillover effect--a negative psychological impact--that could spread to the Midwest," he said. "A bubble is going to happen elsewhere--not in Chicago--because home prices are so far out of whack in some parts of the country," added Mark Malouf, the chief operating officer of Oak Brook-based Montalbano Homes. Housing consultant Steve Hovany, president of Strategy Planning Associates in Schaumburg, said a bubble occurs in a hot housing market where there is great demand but a limited supply, which forces prices up. "That is happening in Las Vegas, where prices have almost doubled in the last year because there is limited land there," he said. But in the Chicago region, he said, "pricing is rational. Houses are getting more expensive, but people are getting more space and the value is there." Despite the plans for huge projects by major builders, Hovany predicts a decline in home sales in the Chicago area next year. "Several factors--higher interest rates and increased costs in labor and materials--will come home to roost next year," he said. About 31,000 new homes will be built in the Chicago area during 2004, according to estimates by Robert Shield, senior vice president of Draper & Kramer Mortgage Corp. He gave those figures last week during a housing outlook conference in Oak Brook. If those figures hold, the number of units (condos, townhouses and houses) built in the metropolitan area in 2004 will be 11 percent higher than in 2003, when Chicago added 27,550 new homes, Shield said. That places the Chicago area well behind Phoenix, the nation's fastest-growing housing market, where builders plan to create roughly 60,000 new homes this year. "There are a lot of efficiencies in large master-planned communities," said John Carroll, president of Kirk Homes. He said the continued strength of sales and the length of time to get approval for new developments--in most cases several years--makes larger projects more cost-effective. Cutting costs has been a big part of the success formula for D.R. Horton, which like Wal-Mart uses its heft to demand lower prices from suppliers. This technique has held down the tab for roofing materials, door frames and appliances. In its latest fiscal year, D.R. Horton said it saved $145 million through its national and regional purchasing programs. That was equivalent to about $3,300 per house. The company "is very focused on being very efficient operationally," said John Burns, a housing consultant based in Irvine, Calif. "There is not a lot of waste in a D.R. Horton home." Some, however, have questioned the company's dedication to quality. For four years running, D.R. Horton has received average to below-average scores in customer satisfaction surveys by J.D. Power and Associates. Mortgage lender Shield said this year's numbers indicate that attached housing (condos and townhouses) comprised 54 percent of sales in the Chicago area in 2004, making it the first recent year that new attached units have outsold single-family houses. "I don't think we are as interest rate-sensitive as we used to be," thanks to the advent of new systems for assessing creditworthiness of borrowers, as well as creative financing alternatives, Shield said. A shift in attitude by consumers has been another key factor, said Malouf of Montalbano Homes. "People are not saving. They are putting their money into real estate," he said. "They see real estate as an appreciating asset and are choosing to put more money there, not in a savings account at the bank that pays 2 percent or less." Copyright © 2004, Chicago Tribune>