Builder sees a much different market emerge

 
By Jean Murphy
Daily Herald Correspondent
Posted1/31/2015 12:01 AM
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  • Andy Konovodoff of K. Hovnanian Homes says the industry moved away from large, 1,000-plus home communities after the recession.

      Andy Konovodoff of K. Hovnanian Homes says the industry moved away from large, 1,000-plus home communities after the recession. Paul Michna | Staff Photographer

  • Andy Konovodoff, president of the Chicago division of K. Hovnanian Homes, is developing 12 communities, including Arbor Trails in Lisle.

      Andy Konovodoff, president of the Chicago division of K. Hovnanian Homes, is developing 12 communities, including Arbor Trails in Lisle. Paul Michna | Staff Photographer

The home construction business has fundamentally changed in the Chicago area since the recession hit in 2008, said Andy Konovodoff, president of the Chicago division of K. Hovnanian Homes.

In 2005 when K. Hovnanian purchased Town and Country Homes and entered the local market, it was building 1,230 homes per year and was the fifth largest builder in the metropolitan area. Nearly a decade later, in 2014, the company built 300 homes, up from 160 in 2011, and K. Hovnanian has changed its strategy moving forward.

"During the boom years we had several large master planned communities going simultaneously. We would purchase a large parcel of farmland and build between 1,400 and 3,000 units with clubhouses and other amenities," Konovodoff said. "But those days are gone. We can't afford to hold a huge parcel of land for six years.

"Now we are doing what the market is telling us -- and that is to purchase small parcels closer to Lake Michigan that can accommodate no more than 50 to 75 units and plan to sell through all of them in a year or two," he said.

K. Hovnanian is looking for smaller opportunities in infill locations and is retracting toward the city.

"For instance, we bought up a rare farm in Lisle and are building Arbor Trails. We also bought an old hardware company headquarters in the Sauganash area of Chicago and plan to open there and we have several small assemblages of lots going in Arlington Heights and Palatine," Konovodoff said.

In addition, other than building duplex-style townhouses in an age-restricted community in Sugar Grove, the company is confining its efforts to single-family homes.

"Our first choice when buying property is to purchase already (partially) developed, distressed lots, begun by another builder. But most of the good ones are already gone. Next, we are heading back toward the city. We also have a high level of interest in buying properties within Chicago and we are reaching out to property owners there," he said.

"What we even considered fringe markets back during the boom -- west of Route 47 and south of I-80 -- simply aren't ripe for today's market. Most builders need volume. They need to be able to count on making 25 to 35 deliveries (with a new-home development) per year and that isn't possible right now. The time will come when we head out that way again, but that time isn't now," Konovodoff said.

K. Hovnanian has also made the strategic decision to widen its geographical area and diversify its price range.

"Our old wheelhouse was in the $250,000 to $300,000 price range. Now we offer a much wider spectrum of housing types, prices and locations. We range from selling homes for $225,000 in Oswego to selling homes for $1.1 million in Lake Forest," he said. "We have something for everyone across our 12 current communities."

His background:

Konovodoff is the son of a Russian immigrant who came to the United States in the late 1940s. His father raised chickens in New Jersey until the early 1960s, when a downturn in the farming industry prompted his father to pursue a career in general contracting. Over the years, the elder Konovodoff learned various trades, from painting and drywall to electrical and plumbing, enlarging his company.

In the late 1970s, he picked up some large Naval contracts, renovating barracks, rebuilding warehouses and replacing old windows on bases like Fort Dix. Konovodoff worked with him, learning the business from his father.

"He had me work with the masons one summer, the electricians another summer and so forth, until I learned the business from the guts of the building, out," Konovodoff recalled.

Konovodoff earned his bachelor's degree in business from the University of New Orleans, working as a Russian interpreter on the side to make money. After college he went home to New Jersey and worked for his dad for another year, getting paid as an independent contractor without benefits and paying self-employment Social Security, just like the 70 other people who worked for his dad. At the time, his father's company had the painting and drywall contract for a huge New Jersey subdivision called "Holiday City" and employees were working in 700 to 800 homes per year. His father was also buying foreclosures in tax lots, fixing them up and then renting them. Konovodoff got experience working on those, too.

But when he approached his father about a partnership, the answer was "no." The old Russian immigrant told his son to go make his own way in the world, so Konovodoff went to work as a superintendent and then a project manager for another large contractor in the area. He gained experience working on everything from strip malls to big box retail stores, homes and even renovations.

Konovodoff even owned and managed a Bricktown, New Jersey, tavern/restaurant/liquor store with a friend for a few years while he was simultaneously buying, fixing up and then selling or renting homes like his father did. But as his own family grew, Konovodoff knew he had to get serious about his career. So in 1992 he went to work for K. Hovnanian Homes in New Jersey as a supervisor again.

In late 1995, at the age of 41, he moved to Illinois and took a job as a superintendent for Town and Country Homes, where he worked his way up the chain of command until he was named a division president in 2005, the year before his old employer, K. Hovnanian, decided to expand into Chicago by purchasing Town and Country Homes.

What is your philosophy of the business?

"It is our responsibility to provide shelter. I feel the people in our business do a nice job of providing buyers with long-lasting value."

What are your responsibilities at K. Hovnanian?

"I act as the general manager for the Chicago Division. I make sure all departments are working together, from land acquisition through home delivery, and meet with everyone regularly. I also manage marketing personally and protect our reputation."

Are you seeing many young Millennial buyers jumping into the market?

"Not yet. The young people are looking for a particular lifestyle. They don't want to leave the city, so they are choosing to rent. That entire generation has also never seen 8 percent interest rates. They think if the interest rates rise to 4 percent, they are too high, so they pull back."

What are the biggest changes you have seen in the housing industry over the years?

"Today's homes really are much better built than those of the past. They are more energy efficient, safer and have longer lasting value thanks to improvements in building materials and institutional practices. Just think about the improvements that have been made with windows, siding, roofing and even coated nails."

Floor plans have also evolved, he said. Formal living rooms are on their way out and rooms in homes are becoming more flexible. Each family can decide for themselves how a given room will be used. The only room that really hasn't changed much is the kitchen, he said. It is still the heart and control center for the family, Konovodoff said.

What is the best part of being a builder?

"I recently drove through the Traditions community in St. Charles, which I helped build 12 to 14 years ago. We took a cornfield and built 750 homes there, creating a place where people now live and enjoy themselves. The houses are all landscaped and decorated and people call them home. It made me feel good to see it."

Can you offer any glimpses into the future of K. Hovnanian in the Chicago area?

"We are planning to expand into Northwest Indiana. Within the next few years we also plan to expand into southern Wisconsin."

For more information about K. Hovnanian Homes, visit www.khov.com.