New Single Family Homes Built by Pasquinelli in Chicago Suburbs (1) Pasquinelli-Portrait Homes is one of Americas largest privately owned homebuilding companies, which specializes in building multifamily and single family houses. In last ten years, Pasquinelli was able to benefit from the boom in real real estate Market Evaluation">estate market in Illinois. The Company has been especially active in building new houses for the residents of such Chicagos suburbs as Arlington Heights, Aurora, Downers Grove, Elgin, Hinsdale, Naperville and Oak Park. Within the matter of this period, Pasquinelli has built 1540 single-family houses and 2050 condominiums is Chicagos suburbia, which points out to the fact that Companys managers were able to properly define the socio-political factors, affecting the trends on the market of real estate in Illinois. However, the progressing marginalization of American society and macro-economic instability in the world is going to force Pasquinellis managers to adjust Companys current business strategy, in order to successfully deal with business challenges in the future. (2) The fixed costs, associated with Pasquinellis business, consist of acquiring materials and land. When Company builds houses on specific order, the fixed costs also include the architectural development of every particular project. Among the most important variable costs, we can list the price of labor and the price of landscaping.
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At the same time, it would be wrong to suggest that both types of costs are always easily identifiable, because homebuilding business is the subject to numerous rules and regulations that often affect fixed costs to a significant degree in every individual case. (3) As for today, the homebuilding market type in Chicagos suburbia can be identified as perfect competition. The main indication that prove the validity of this suggestion is the fact that there are at least two other large building contractors that compete with Pasquinelli in the area – RMK Management and Lexington Homes, which provide customers with the same scope of services. Both companies have the same specialization as Pasquinelli. In its turn, this allows us to conclude that the final product, provided by three major competitors in the area, is marked with the high degree of homogeneity. As result, the prices for newly built houses in Chicago suburbs vary insignificantly. At the same time, it is obvious that Pasquinelli has an advantage over its main rivals, because of its sheer size.
This allows Company to benefit from the uniformity of its services, throughout the nation, which strengthens Pasquinellis competitive edge. If it was not up to the recent macro-economic developments and the fact that interest rates continue to increase steadily in U.S., Pasquinelli could have beaten markets competition with ease, because unlike its main rivals, Pasquinelli is capable of reducing the price for its services, without undermining the overall effectiveness of its current business strategy. However, it appears that the whole nature of homebuilding in America will undergo transformation in very near future, which is going to create a situation when contractors size will cease to define the chances of its commercial success, to a degree that it used to in the past. The trends that will define dynamics on the market of real estate in the future can clearly be seen today more and more people prefer to rent houses and apartments, instead of buying them. This tendency is especially visible in suburban areas that are adjacent to industrial centers, such as Chicago. Therefore, it is only the matter of very short time, before the best prospects of making commercial profit, associated with homebuilding, are going to be closely linked to the construction of apartment buildings. This brings us to conclusion that Pasquinellis commercial efficiency is going to be greatly undermined, even in few years from now, unless Companys managers consider restructuring, as the method of dealing with the challenges of the future.
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(4) There are two major leading indicators, when it comes to assessing dynamics on the market of real estate demographical shifts and the fluctuations of interest rate. Very often, these two indicators correlate with each other. The population in Chicagos suburbs is becoming increasingly diversified, which comes hand in hand with living standards in the area being continuously lowered. In its turn, it reduces markets demand on newly built houses that are meant to attract buyers with steady income. It is not a secret that, once suburban neighborhood begins to attract representatives of ethnic minorities, the prices for houses drop drastically in that particular area. Within a matter of last year, the average price for four bedrooms family house in one of Chicagos most prestigious suburbs Arlington Heights, has dropped from $440.000 to $410.000. Of course, this cannot be explained by demographical shifts alone.
Potential customers are not in big rush to invest in real estate, because the ever-increased rate of credit interest chip away at the prospects of coming up with the income, on their part. Thus, Pasquinelli & Portrait Homes is facing a situation when Company cannot continue with its current business strategy, without trying to adjust it to markets objective realities. At the same time, the experience gained in the field of house building, prevents Company from adopting a truly innovative outlook on its own essence, as private contractor. Pasquinellis web site boasts the fact that Company keeps growing, even though that such growth can hardly be thought of as the ultimate proof of companys commercial vitality. It appears that Pasquinellis managers simply lack the strategic insight on the subject of Companys further development, which is quite explainable, given the fact that Pasquinelli & Portrait Homes has been owned by the members of the same family, ever since it was founded. (5) There can be no doubt that, in three years from now, the contemporary micro and macro-economic tendencies, which affect Pasquinellis operations nowadays, will be intensified.
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This has largely to do with the fact that U.S. currency ceased to represent the objective value, which is the reason why more and more countries choose in favor of using Euro as legal tender, instead of U.S. dollar. As result, Pasquinelli is going to be able to benefit on reducing the amount of fixed costs. However, the growing interest rates will cause many people to think twice, before investing in real estate, which will have a direct impact on Company. It would be the most logical for Pasquinelli & Portrait Homes to slowly begin to transform its essence from independent homebuilding company to an apartment-building sub-contractor.
Chicago Real Estate Market Conditions. 2007. Berg Properties. Retrieved February 4, 2008 from http://www.bergproperties.com/chicago_neighborhood s.php Our Homes. 2007. Pasquinelli & Portrait Homes Web Site.
Retrieved February 4, 2008 from http://www.pasquinelli.com/ourhomes/.