Daily Journal 06-26-2008 (House Mold)

Daily Journal 06-26-2008 (House Mold)

Financial Problems for Kennedy Homes has Ripple Effect

By Gary Mays and Kristin Szremski

The impact of the collapse of Kennedy Homes is having a significant, but not insurmountable, impact on the real estate market here – but local Realtors and others monitoring the situation say it’s partly a psychological phenomenon, and hopefully, a short-lived one.

“What’s scaring people now is Kennedy Homes,” said Sandy Workman, president of the Kankakee County Association of Realtors. “We’re holding steady and even making gains without median home prices but the media hype (about Kennedy) doesn’t help.”

Mirroring a national trend among firms linked to the recent housing boom and bust, South Barrington-based Kennedy is in serious financial trouble; and in danger of becoming insolvent, according to Crain’s Chicago Business.

Residents in Kennedy subdivisions, primarily Eagle Creek in Bourbonnais, said they’ve been unable to talk to someone from the builder about vacant lots, half-finished houses, leaky basements, poor workmanship and construction waste found dumped in their neighborhoods.

What’s more, they say lack of maintenance on the vacant lots and public rights of way are posing not only an eyesore but a safety hazard to kids.

“My biggest complaint is that the unfinished (homes and landscaping) looks terrible,” said Jayme Broom, who lives on Eagle Bluff Drive and worries that overgrown weeds make it difficult for motorists to see children playing. “I’m looking right now out my backyard at two unfinished houses.”

Many Kennedy homeowners are in the midst of forming an association, which met for the first time Tuesday, to draw attention to their plight and push for action. At the same time, local real estate professionals are trying to take stock of any potential market impacts, while reflecting on how the situation came about here.

‘Unfair advantage’

Sally Schmidt, executive director of the Home Builders Association of Kankakee, said Kennedy Homes had an “unfair advantage” over local homebuilders. Because the company had deep pockets – and plenty of research on the area’s economy and available land for sale – they were able to acquire large tracts of property at a time.

“Smaller builders couldn’t afford to buy up half a dozen lots,” she said.

Kennedy started building homes in Bourbonnais between 2005 and 2006, Schmidt said. But that didn’t benefit the local economy.

“When companies like Kennedy come in, I think the most unfair advantage (is) it costs the local community,” she said. “They have their own everything; their own Realtors, their own builders.”

Workman, also a Realtor with Speckman, said not only Kennedy, but other builders descended on the region over the recent decade of soaring housing values to build larger, more expensive homes for what they saw as a new market. Part of that perceived market were upper-middle class families relocating to Kankakee County from Chicago’s south suburbs, where taxes and quality of life issues drove many out. And while those larger, pricier houses may be difficult to sell or salvage, existing homes are retaining value and continue to sell, she added.

Wary approach

Schmidt said many members of her association didn’t want to locate the homes they were building near the Kennedy Homes subdivision in Bourbonnais. They were afraid Kennedy’s reputation for shoddy workmanship would scare off potential buyers, she said.

“There were builders that felt that if they had lots near (Kennedy Homes) it would be harder for them to sell their homes.”

She also blames tougher building codes on the larger contractor.

“I have no doubt that they are the ones that tightened the screws on building codes. … They pushed local building codes to the max. They pushed it to the max.”

The Home Builders Association of Kankakee has 145 members, made up of builders, developers, contractors, and others involved in the building market such as banks, subcontractors and materials suppliers.

Cheryl Herberger, of Herberger Construction, is president of the Home Builders Association of Kankakee. She said she’s concerned for the residents in the Kennedy Homes subdivision but said consumers need to be aware before they buy anything, whether it’s insurance, a car or a home.

Still, she holds Kennedy Homes accountable for the situation, and that the ordeal emphasizes the importance of working with local builders and contractors, who will be around if things go wrong. And now that something has gone wrong with Kennedy, Herberger worries the newly nounded homeowners association won’t be enough to mitigate the problems residents have.

“When the builders aren’t there to be accountable, it makes it difficult to proceed whether the home is half-built or not,” she said.

Note: Attorney Thomas Zimmerman filed a lawsuit against Kennedy Homes on behalf of a homeowner whose house developed mold.

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