Neumann Homes, Inc., the Chicago-area based top-50 home builder, today (Oct. 22) became the first big builder to go under amid a brutal and relentless decline in the market for new homes. The company on Monday laid off most of its employees and closed its sales, production and customer service offices.

Neumann announced late today that it has "been unable to procure adequate funding to operate their business" and that it intends "to file for relief under Chapter 11 of the [U.S.] bankruptcy code." Neumann said it is currently in default under the respective credit facilities with its lenders and has "executed a forbearance agreement that will provide limited funding to effectuate an orderly transition into chapter 11." It also said it is "working with its lenders to structure a process for transitioning the completion of homes where construction has commenced but has not been completed and to provide funding in connection with the evaluation and disposition of the company's remaining assets."

"The significant downturn in the Detroit, Chicago and Denver housing markets resulted in this situation," said Kenneth P. Neumann, CEO of Neumann Homes. "Over the past two years the Detroit housing market has dropped by over 80% costing the company in excess of $60 million in losses. The market downturn in the Chicago and Denver housing markets are now in excess of 50% with home prices dropping from 10% to 25% in some sub-markets. Even after the significant help we have received from our lenders this year the company can no longer weather this storm."

Neumann said it has placed in escrow the deposits of home buyers who have purchased homes that have not yet started construction, and it said it will ask the bankruptcy court "to allow for its immediate refund."