A jittery real estate market hasn´t rattled the nerves of Greg and Julie Miller. They´re taking the plunge and moving this month to a new house in the North Shore suburb of Glencoe.
It´s a luxury model built by a developer on spec, or speculation, which means no buyers, not even the Millers, were in sight when the house was planned.
“We weren´t actually looking to move,” said Greg Miller, a financial advisor at Bernstein Global Wealth Management, Chicago.
But, the Millers, who have two young daughters, had long admired the houses built by Heritage Luxury Builders of Northfield. They liked the traditional style and the quality of the craftsmanship.
They had even considered hiring Heritage to build a custom home, but, Greg Miller said, it would have been hard to find land, not to mention the difficulties of managing a big building project.
So when the Millers learned Heritage was building a spec house on one of their favorite streets, they started to watch the construction, driving by the house often to check on the progress.
“We looked at it and looked at it,” said Greg. “When we walked inside, that was our downfall.”
Looking for a new house that´s fabulous and finished? No fussing with paint chips, carpet swatches, or tile samples? No waiting for contractors to call back, or even show up? Then this could be your time.
Anyone who´s been paying the least bit of attention to the real estate market knows that home buyers now have the upper hand. That certainly holds true for high-end buyers who want a luxury spec house–a turnkey place that´s magazine perfect.
The latest crop of new North Shore houses, ready for occupancy, range from about $1 million to more than $5 million. But discounts are common, with the most expensive properties going for as much as $500,000 under list price, agents and home buyers say.
“Buyers today are very picky,” said Sharon Friedman, agent at Coldwell Banker, Winnetka South. “When they´re interested in a house, they try a lowball offer and sometimes they´re successful.” Meanwhile, builders have pulled back, ratcheting down the number of spec houses they´re putting up.
A lower supply of spec houses, builders say, should mean better times for them in 2007 and beyond–which might also mean less bargaining power for buyers going forward. Others say if the existing inventory isn´t reduced by spring, the bargains could last much longer.
“The (spec home) market is still a little overbuilt. But inventories are going down,” said Orren Pickell, chief executive at Orren Pickell Designers & Builders based in Lincolnshire. The company recently opened a showroom in Northfield with vignettes to showcase its design ideas for renovations and custom projects. Agent Friedman says builders are a bit more cautious. “They´re shying away from doing the really high-end houses,” she said.
Even so, she notes, a lot of expensive houses remain available for sale.In October, there were 127 active listings of both new and existing houses from Evanston to Lake Forest priced at $3.5 million or more Friedman said, adding “that´s a lot of inventory.”
The availability of new houses in established North Shore suburbs has made it harder lately to sell existing houses, Friedman noted. And many buyers prefer new houses, even though an old one may have a better location, or the kind of details not found in new construction. “New houses typically win out,” she said.
Here´s one reason why: heated driveways. Heritage Luxury Builders has a new house for sale at 800 Bluff Street in Glencoe. The pricetag: $3.795 million.
Built on a slopping lot that could prove tricky for driving in bad weather, the house has underground coils that automatically melt snow and ice. Older houses don´t have such features. Home buyer Jeanne Morette moved several years ago from a 100-year-old house to a new spec house in Winnetka.
“I loved the old house. It had so much charm,” said Morette. “But the bedrooms were small and the closets were small. We were looking for something more modern.” In Glencoe, the new Bluff Street house does pay homage to the past with its French eclectic style and a European flair.
“People like the Old World look and we want our houses to blend into these (older) neighborhoods,” said Victoria Birov, attorney at Heritage, a family operation run by her mother and father, Milena and Leo Birov. In 1990, they built their own dream house. They then started to build them for other people.
Inside the Glencoe house, custom features include a grand foyer with a huge mahogany entry door and circular staircase. There´s a cherry paneled library, state-of-the-art kitchen, and inlaid floors. A large see-through limestone fireplace serves the living and family rooms.
The slopping lot allowed for a walk-out basement, though it´s hardly like a basement with its full size windows and 10-foot ceilings. The lower level also has a sixth bedroom, with a bath, movie theater, wine cellar, and sauna. And because the garage is on the lower level, the builder tucked an elevator into the floor plan.”It´s easier to bring up groceries that way,” said Victoria Birov.
This newly built home in Glencoe by Heritage Luxury Builders is placed on a sloping lot that could prove difficult for driving in bad weather. So the driveway has underground coils that automatically melt snow and ice.
Heritage Luxury Builders currently has 12 spec houses under way. The company has built 60 houses in the last 15 years in the North Shore suburbs of Kenilworth, Winnetka and Glencoe.
“Up until last year, we were selling houses before they were finished,” said Milena Birov, sales agent for Heritage, who works at Koenig & Strey GMAC, Winnetka.
Heritage has several finished houses ready for someone to move in. The house on Bluff Street was completed last July.
“Buyers today are more cautious,” said Milena Birov.
Though the Millers had fallen in love with the house they purchased, they were also careful to look at other houses on the market.
“We knew what was out there in terms of similar size and location,” said Greg Miller, noting “Without question, there´s a little wiggle room on pricing.”
Another factor slowing spec home sales, brokers say, is that buyers moving up to a more expensive house have to sell their current home, a possible deal breaker in a market where the sales of existing homes have slowed.
Builder Jeff Samuels thinks that´s less of a problem with really expensive homes. Buyers in that category, he said, are more likely to be able carry the cost of two homes, until the old one sells.
“At the upper end of the market, a number of (buyers) are insulated from the day-to-day pull back in the housing market,” said Samuels, president at Samuels Homes LLC, Northbrook.
Samuels builds two to three luxury spec homes a year, mostly in Highland Park. The houses range in price from $1.5 million to $4 million.
Samuels said he´s careful to put money into the features most buyers want, instead of frills. For example, he always includes a well-equipped kitchen, typically with a 48-inch Sub Zero refrigerator, Wolf range, and multiple dishwashers.
“I don´t build a wine cellar,” he noted. “It´s a cute conversation piece, but I´m not sure how many people actually want one for day-to-day living.”
Buyers are looking for bargains, Samuels said. He recently sold a spec house for close to the asking price. But eight weeks ago he discounted the price on another house to $2 million from its original asking price of $2.2 million. “We are getting lookers,” he said.
RedRock Development LLC, a builder based in Deerfield, recently turned down an offer on one of its spec homes. “We don´t want to sell too low,” said Jamie Pollack, who helps her husband, Matt, run the business. She too believes buyers are being conservative and they´re not rushing to make a move. She characterizes the spec market as “consistent,” adding, “It´s definitely slower, but we are still building.”
Since last year, North Shore land prices have fallen about 5 to 7 percent, according to Bart Kempff, vice president of development at Orren Pickell Designers & Builders. Like other North Shore builders, Pickell typically buys teardown old houses to acquire the land.
“Glencoe has seen the largest drop in land prices because of oversupply,” he noted. Kempff currently counts 43 spec homes on the market in Glencoe, representing about a two-year supply. “Glencoe has been the hardest hit North Shore suburb,” he said. “Two miles south in Winnetka, the market has stayed fairly strong during the last year.”
But more than 30 luxury spec homes in any North Shore town, except for Highland Park which is larger, is too many, Kempff said.
For houses in the $4 million to $5 million range, Kempff figures prices are being discounted as much as 15 to 20 percent.
“The biggest prices have the biggest drops,” he said. “Rarely will someone get full price on a spec home right now.”
As for his company´s strategy, Kempff said they try to price the house correctly from the start. Though building has slowed, Pickell hasn´t exited the spec home market. The company will have four spec homes on the market by the end of the year, Kempff said.
The company also just opened a new development in Bannockburn, Tarns of the Moor (“Tarns” in the Scots language means “tiny lakes.”) The property has a series of small lakes and waterfalls, which act as a water management system, builder Pickell said. The 33-acre site on Telegraph Road will have 10 houses, each set on a 3 to 4-acre lot, and priced at about $5 million.
Pickell plans to start off the development with a new spec house, or as he likes to say a “concept” house. Construction gets under way in about six weeks.
Pickell expects to eventually sell his concept house, but meanwhile, it will serve as a showcase for his company´s latest designs and features.
The 8,000-square-foot manor-style house has lots of stone and timber. “It looks like a house you´d see driving down an English Road,” said Pickell, figuring it just might appeal to someone looking for a dream house that´s finished.