Neumann Homes to file bankruptcy

In the largest bankruptcy of a major Chicago-area home builder in recent history, Neumann Homes late Monday said it laid-off most of its workers and intends to file for Chapter 11 bankruptcy.

Warrenville-based Neumann Homes, consistently among the area's top six homebuilders, had key developments under way in Antioch, North Aurora, Gilberts, Grayslake, Hanover Park, Lakemoor and Wonder Lake.

Construction on many or all of the sites is presumed to be suspended, according to industry practices.

Neumann was building more than 1,000 homes a year for several years at its peak, which it reached in 2005, according to industry statistics.

"The company can no longer weather this storm," said Kenneth Neumann, chief executive officer, in a statement late Monday.

Area real estate analysts said the family-owned firm began expanding just as the housing market turned down in the Chicago area at the end of 2005 and earlier in Detroit.

"They were too aggressive at a time when we knew the boom of '03 to '05 couldn't be sustained," said Tracy Cross of Tracy Cross & Associates, a Schaumburg-based real estate research firm.

Neumann Homes' average home cost ranged from $170,000 to $370,000, with an average of $272,000, according to Cross research.

The company in its statement assured customers who have purchased homes not yet under construction it will request that a bankruptcy court allow the company to refund their escrowed earnest money.

The short statement made no mention of the Neumann Homes customers with houses partially completed.

With all three of its key markets down -- Chicago, Denver and Detroit -- Neumann Homes said it lost more than $60 million in Detroit alone. It bought Detroit-based Tadian Homes in 2005.

Of its current inventory of 5,485 single and multi-family homes in the Chicago area, 2,619 have been sold, according to Tracy Cross. Its Chicago area inventory reached 5 years worth of unsold homes, according to Cross, when 30 to 36 months is an average time for new homes to remain on the market.

The company had sales topping $500 million in 2005, according to Hoovers.com, and more than 400 employees.

Neumann Homes has 46 developments active in 18 Chicago area towns, according to Cross.

Tracy Cross' second quarter research indicates the following developments, before Monday's announcement, were under way in the area.

• Antioch: Clublands of Antioch with 407 homes planned, 150 sold.

• North Aurora: Tanner Trails with 518 homes planned, 490 sold.

• Gilberts: The Conservancy with 796 planned, 5 sold.

• Grayslake: Lake Street Square with 263 planned, 43 sold.

• Hanover Park: Church Street Station with 126 planned, 60 sold.

• Lakemoor: The Glen at Lakemoor Farms with 219 planned, 145 sold.

• Wonder Lake: The Meadows of West Bay with 286 planned, 16 sold.

Cross said Neumann Homes was developing prime land that other developers may find attractive if Neumann cannot secure funding under Chapter 11 protection.

As for Neumann customers with complaints or partially built homes, Cross has little advice.

"I'm in the industry and if I was (in that spot), I wouldn't know what to do," Cross said. "Call my lawyer of course."