The November bankruptcy of Neumann Homes, the Warrenville-based builder with 15 Chicago-area subdivisions, has raised questions about the health of the local housing market.

Some housing consultants predict that there could be other bankruptcies in a local market which has declined substantially from the level of recent years and may not recover to some degree until late in 2008 or even in 2009.

But some builders like Scott Sevon of Sevvonco in Palatine are confident that many companies will make it through current conditions. The former president of the Home Builders Association of Chicago noted that very few people point out that the 20 to 40 percent decrease in home sales came after record sales years.

And, despite the dip in sales, he offered some unsolicited advice for prospective owners.

“I realize that it is an anomaly, but now is a good time to buy a house. It seems silly,” he admitted. “But mortgage rates are at a good level. And some builders are offering reduced prices and other incentives. That is what I tell my friends.”

Furthermore, Sevon, who builds new custom homes and remodels houses, said the remodeling business has been strong in 2007 and will become stronger in 2008 and beyond.

“I expect the remodeling market to explode because there are many houses over 30 years old. On a different scale, it is like needing to have worn tires replaced on your car,” he said. “People are not moving up as rapidly to another house. So, they want to have their current house fixed up.”

He explained that there have been problems in local markets, including the harm caused by sub-prime mortgage loans and some companies overbuilding in various places like Hinsdale, Arlington Heights and Mt. Prospect.

“We will learn from it and get through it,” Sevon said.

He added that the particular problem with Neumann Homes seemed to be its purchase a few years ago of a home builder in the Detroit market, which later declined significantly when the auto industry had problems.

“Timing is everything,” Sevon said.

Steve Hovany, president of Schaumburg-based Strategy Planning Associates, a marketing consulting firm serving builders and others in housing industry, agreed that Neumann’s move into the Detroit market was a disaster.

That ill-fated move, which experts speculate caused the bankruptcy, in turn created problems this year for people who have purchased Neumann homes in various communities in the Chicago suburbs and have not moved into their homes.

Hovany said people whose homes have not yet been started may get their money back from the bankruptcy court. But the prospective owners with homes in some stage of construction “are really up in the air about who will finish the houses.”

And the Neumann situation may be just the tip of the iceberg, said Hovany, noting that there could be more bankruptcies by builders in the Chicago suburban market. Already in that category is Cardinal Homes, which built houses in Yorkville and Plainfield. Burnside Construction, which is based in Downers Grove, also filed for bankruptcy earlier this year.

Hovany predicted that as other weaker players follow down the bankruptcy road there will be a consolidation in the local home building industry, because the average housing project is losing money.

Agreeing with Hovany about more builders going out of business was another consultant, Lance Ramella, president of Meyers Builder Advisors in Oswego.

“The move into the Detroit market was a kiss of death., said Ramella, pointing out that Neumann took a risk at the wrong time.

Ramella also agreed with Hovany that there will be other home builders who will go out of business because of various conditions in the Chicago area market.

“It will run the gamut of small, medium and large builders,” he said. “Large national builders are mothballing projects. Survival of some mid-sized builders will depend on how smart the companies were about factors such as carrying land inventory before the downturn in 2007.”

Generally it takes a year to 18 months for the housing market here to work off the accumulated inventory, according to Ramella. After a bust in the fourth quarter of 2007, he expects some pickup after Feb. 1 when the housing market becomes more active as the move begins into the spring and summer selling season.

“I do not have a number for a prediction because the current downturn is in a different kind of market,” he said.

Ramella said in previous downturns there were larger losses of jobs in the Chicago area. But now the job market is still good. And mortgage rates now are still affordable.

So, the biggest problem in the Chicago suburbs, according to Ramella, is the mindset of potential buyers, who are afraid that prices will fall more in the coming months. They need to see a stabilization of housing prices not only in the new construction market but also in the resale housing market.

Then that condition should start a trickle-up effect into various price ranges of new housing construction, he said.

“There is a lot of inventory we need to work through. There needs to be more balance in the market,” Ramella said. “I hope there will be more balance by the fall of 2008.”

In the meantime the unfinished developments of Neumann Homes throughout the suburbs provide a vivid picture of the current downturn in the housing market.

On a Web site for buyers of Neumann Homes there are entries like “I know a lot of Neumann’s customers are probably a lot worse off than me (people who have homes currently under construction) but I’m wondering how this will affect me and my half-built subdivision? There are empty lots all over the place, homes currently under construction, parks they are supposed to put in, etc.

“Are they going to leave my subdivision unfinished? Will another builder buy the remaining land and fill in the empty lots? They still owe me sod and I’m wondering if that will ever happen, and what this means for my home warranty.”

Those questions remain because telephone calls by The Business Ledger were unanswered by a staff member of Neumann Homes, an attorney for the company and by an assistant trustee for the United States Bankruptcy Court for the Northern District of Illinois.

Neumann, which is one of Chicago’s top ten builders, stated that its assets and its liabilities both exceed $100 million.