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Chicago Sun-Times –June 22, 2008

One-day Auction Set for Neumann
By Bill Cunniff

Twenty-six new homes and 23 partially completed homes are slated to be sold in an upcoming auction for a bankrupt home-building company.

The auction will be at 1:30 p.m. June 28 at the Westin Hotel, 400 Park Blvd. in Itasca. Registration begins at 11:30 a.m. The incomplete homes are all under roof, sheathed, and at trim stage or beyond.

The properties slated for bidding include:

9 town houses at Church Street Station in Hanover Park.

9 town houses at Lake Street Square in Grayslake.

16 single-family homes at Summer Gate at Southbury in Oswego.

7 town houses at Prairie Ridge in Minooka.

2 single-family homes at the Conservancy in Gilberts.

2 town houses at the Glen at Lakemoor Farms in Lakemoor.

4 town houses at Chatham Grove in Aurora.

Warrenville-based Neumann Homes filed for bankruptcy in November. In better times, the firm had ranked among the Chicago area's top homebuilders in the Sun-Times annual survey. At its peak, Neumann Homes constructed more than 1,000 homes a year for several years. The company had $517 million in closing revenue in 2005.

"This is a one-day only opportunity for homebuyers, small builders and opportunistic investors to purchase these properties discounted from their original prices," said Evan Gladstone, executive managing director of NRC Realty Advisors, the auctioneer.

The properties may be reviewed at the auctioneer's Web site, www.nrc.com/807. Properties will available for viewing from 1 p.m. to 4 p.m. today.

"We strongly recommend that buyers visit every property they are interested in bidding on. We encourage bidders to bring along their contractors or decorators during the open house visits," Gladstone said.

Neumann Homes auction. NRC Realty Advisors LLC, (800) 747-3342 ext. 807, or visit www.nrc.com/807. Troubled homes industry

The nation's housing downturn is shaping up to be the worst in a generation, according to a new study.

The falloff in housing starts, new-home sales and existing home sales already rivals the worst downturns in the post World War II era. And home price declines and mortgage defaults are the worst on records that date back to the 1960s and 1970s.

"The slump in housing markets has not yet run its full course," said Nicolas P. Retsinas, the director of the Joint Center for Housing Studies of Harvard University, which issued the report. "Mortgage rates have barely responded to the aggressive easing of the Federal Reserve, the supply of for-sale vacant units continues to grow and much tighter underwriting is locking many would-be homebuyers out of the market.

"With home prices falling in most metropolitan areas, homeowners are tightening their belts, remodeling less and staying on the sidelines," he said.

The number of homeowners paying more than half their income on housing rocketed from 6.5 million in 2001 to 8.8 million in 2006, the report said. This reflects looser lender enforcement of debt-to-income caps and the widespread use of adjustable rate mortgages that have been resetting to higher payments.

With so many homeowners' budgets stretched thin and home prices falling in many areas, foreclosures are skyrocketing. The number of homes entering foreclosure nearly doubled, from about 660,000 in 2005 to 1.3 million in 2007. The report concludes that these high levels of foreclosures will continue to exert extreme downward pressure on prices, especially in low-income and minority areas, where riskier subprime loans are most heavily concentrated.

The problems created by overheated housing markets going bust are not confined just to housing, the report said. "As losses on securities backed by subprime mortgages escalated, few investors wanted to purchase them, the market value of these securities plummeted, and the Federal Reserve had to take unprecedented steps to prevent the failure of major financial institutions," said Eric S. Belsky, the center's executive director. "This has tightened the availability of credit well beyond the confines of just the mortgage market. On top of this, declines in residential construction shaved nearly a percentage point from national economic growth in 2007."

The somber conclusion is that if the economy slips into recession or job losses keep racking up, household growth and homeownership demand could fall even more.

On the other hand, the report sounds a more optimistic note about the medium- to long-term. "At some point demand will bounce back," said Retsinas. "Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability. It is difficult to judge how far away from these conditions we may be. It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets."

Barring a prolonged period of serious economic decline, however, the report concludes that the outlook for household growth is about 14.5 million over the next 10 years. The main risk to the long-run outlook, the report notes, is a dip in the level of immigration from its recent 1.2 million a year pace due to weaker labor markets.