Illinois Business Journal - Number, quality of new Illinois homes up in 2004

Illinois and Missouri home builders agree on two key facts: 2004 was a blockbuster year for new home starts in Southwestern Illinois, and the average price range of the new homes being built here has risen significantly in the past year.

According to the Home Builders Association of Greater Southwest Illinois and St. Louis-based Market Graphics, the firm that generates the numbers, municipalities in St. Clair County issued a record number of permits during the first nine months of this year.

A total of 25 percent more residential building permits were issued in O'Fallon during the first three quarters of 2004 as compared to the same period in 2003. In Swansea, the number of permits issued during that same time period in 2004 increased by 80 percent over the first three quarters of 2003. And in Fairview Heights, the number of permits issued to home builders during the first three quarters of 2004 alone represented a whopping 150 percent increase over all compared to 2003.

In Madison County, the city of Edwardsville issued 113 permits during the first nine months of 2004, the same level as in 2003. Highland, however, saw its new home starts increase by 100 percent or 41 permits over what the city issued in 2003. Collinsville also witnessed a 100 percent increase in permits during the first three quarters of 2004, issuing 30 more permits than the previous year. From January through September of 2004, Maryville's new home starts increased by 10 percent.

And although 2004 has not yet reached its end, St. Clair County on the whole has already surpassed its 2003 record of 1,151 new home starts, totaling 1,215 for the year so far.

As of the close of the third quarter of 2004, Madison County's new home starts totaled 1,057; this compares to a total of 1,360 new homes starts in the county during the same period in 2003 and 1,263 homes in 2002. The big increase in Madison County new home starts occurred in 2002, compared to only 955 new homes built in 2001.

Jerry Rombach, executive officer of the Home Builders Association of Greater Southwest Illinois, said not only are there a lot of home builders breaking ground, but the value of what they're building - what the market is demanding - definitely increased over year 2003.

"In both Madison and St. Clair counties, there is a clear trend toward the $225,000 to $275,000 price range," said Rombach. "In Madison County, in fact, we're seeing a significant drop in new home building in the $125,000 to $175,000 price range."

The increased value in what is being built residentially is reflected in two measures, he said. The first is increased sales prices; the second is in the type of lots being developed.

"I think the cost of land is dictating some of that," Rombach said. "The available lots are designed to support a higher price point."

The Jones Co.'s relationship with Southwestern Illinois continues to grow; a division of Centex Homes, the Missouri builder chose O'Fallon and Shiloh as entry points because of their close proximity to downtown St. Louis, according to Ken Stricker, St. Louis division president.

"It's a growing market and we wanted to be a part of it. We're currently exploring Monroe County, too," Stricker said.

Jones has built approximately 200 homes in St. Clair County during year 2004. "We're really starting to grow our reputation with the Southwestern Illinois real estate community, agents and buyers," he said, "and our name is starting to take hold."

Hayden Homes Inc. is another Missouri builder that has met with success in offering semi-custom homes on larger lots in Far Oaks, a community in unincorporated St. Clair County just outside Fairview Heights. Jeff Vassalli, general manager of Hayden's Illinois division, said the reasonable cost of land is allowing the builder to offer custom features commonly included in its Missouri-based product but at a lower price point.

"What we're building in Illinois is similar to the type of home we've built in St. Charles, Missouri," said Vassalli. "We're actually seeing (Illinois) buyers relocating from Chicago and Peoria."

Mark Fulford, president of Fulford Homes Inc. - an upscale home builder in O'Fallon and Swansea - said the Southwestern Illinois market is still a healthy one in terms of supply and demand, but that builders should be cautious not to take a stance that is too aggressive.

"Hopefully we as builders will continue keeping an ear to the ground and being careful not to get too far ahead of the market and overbuild, putting too much product out there," he said.

Another factor - some of the new fee structures that communities are imposing - is also driving the immediate market to higher-priced homes, according to Rombach.

As an example, he noted, Waterloo in Monroe County substantially increased its utility tap fees and its building permit fees a couple of years ago. "We convinced them that, to a point, they were pricing themselves out of the market," said Rombach. "It took awhile, but they rolled those (fees) back and will do incremental increases instead."

In the first nine months of 2003, Monroe County issued 358 residential permits but it's likely that total for 2004 will come close to 300, he said.

An often-asked question is this: Why are the major St. Louis home builders attracted to St. Clair County but are not building in Madison County? The answers, Rombach said, are multi-faceted.

"The production builders, especially those who come over from St. Louis, have committed to St. Clair County but not yet Madison County," he said. "Anecdotally, I've heard that the more mature interstate system, the presence of a regional shopping mall (St. Clair Square) and Scott Air Force Base have created an environment that is more conducive of Missouri. The other anecdotal message I've heard from the building community is that the litigious nature of Madison County deters them from wanting to launch residential building projects there."

But don't count Madison County out just yet as a market for the Missouri home builders, Rombach said.

"I know those guys are looking up here," he said. "It's only a matter of time. It's inevitable that the big Missouri builders will find opportunities in Madison County."

Six smaller, niche home builders from Missouri recently contacted Rombach's organization and are pursuing a combined project in Belleville and Shiloh.

"They're seeing a continuation of something," he said. "Is it that Southwestern Illinois is that great, based on any barometer, or is it the recognition that we're running out of land in Missouri? It's got to be a combination of both."