Demand still growing for new homes in C-U area
SAVOY — Home builders say they're seeing a second year of resurgence in the Champaign-Urbana market, with strong demand for custom-built homes.
"It looks like we're going to have a great year," said Steve Meid of Signature Homes. "We have about 30 homes under contract, with some of those closed and some in process. That's probably as much as one builder typically can do."
Meid said 2011 was the low year for his firm, with about 22 homes built. Last year Signature built 40, and Meid said he expects to top that easily this year.
Signature builds in the C-U, Bloomington-Normal and Peoria markets. He said Bloomington-Normal is "still real slow," but sales in C-U and Peoria are strong.
Area hospitals and the University of Illinois are bringing in new people, and recent UI coaching changes in football and basketball spurred demand, he said.
But Meid also attributes the resurgence to longtime residents who are now confident they can sell their existing homes.
Several customers who came to him last year made their purchase contingent on selling their existing homes.
"All those people sold their homes. Some sold quick, some amazingly quick," Meid said. "It's a seller's market — there's some demand for homes now, and there aren't as many homes on the market as there used to be."
Another factor influencing new-home sales is the low cost of borrowing, said Mike Kennedy, president of the Home Builders Association of East Central Illinois.
"Mortgage rates are still fantastic, and that helps our business," said Kennedy, the owner of Kennedy Builders. "Cheap money to buy a new home is always a positive."
Meid said he sees strong interest in homes selling for $250,000 to $350,000.
"That would be the majority of homes we're building, but we're still building homes in excess of $500,000," he said.
Customers seem to be willing to scale back in size, but they still want nicer finishes, he added.
They're choosing granite or quartz counter tops for the bathroom as well as the kitchen, and they're requesting more hardwood and higher-end appliances and cabinetry, he said.
Nicole Thompson, vice president of McGuire Custom Homes, said many of her customers "are asking for one-story homes with a finished basement — a little smaller (than in the past) with nicer features."
Those include upgraded appliances, hardwood floors throughout the house and more custom features in the cabinetry, she said.
Kennedy, who ranks himself among the smaller builders, said he expects to see a 50 percent increase in business this year, with many of the homes he's building selling for $300,000 to $400,000.
Most of his projects are custom builds, or "pre-solds." But some builders have begun constructing more homes on speculation, hoping someone will want to buy them.
"It looks like the spec market is doing better than in the past," Kennedy said.
Of the houses that Signature Homes has under contract this year, about 25 are pre-sold and five are specs, Meid said.
"There's a huge shortage of spec homes on the market," he said. "They're selling before we even finish them."
Meid said only a few builders locally are building spec homes — and for good reason. Once the economic downturn hit, spec homes were seen as risky, and it was difficult for some builders to get loans for them.
Thompson said 35 percent to 40 percent of the houses that McGuire Custom Homes will build this year are spec houses. She said the company returned to the spec market last year.
"Before that, we hadn't done a spec home since 2009," she said.
Kennedy said Champaign-Urbana didn't see the extent of the housing downturn that other parts of the country did.
"We have strong economic engines here, with the university and medical facilities," he said.
Kennedy said the years from 2009 to '12 were "pretty rough nationally" for the home-building industry. But projections from the National Association of Home Builders show total new home sales this year topping the levels in 2008, he said.
Meid said his business started experiencing drops in demand in 2007 that continued in '08 and '09.
When the new home buyer tax credits became available in 2009, Signature offered smaller homes "at the right price point," and the drop in business subsided. But the doldrums continued until last year's resurgence.