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Bob Schottenstein says people ask him if he's crazy. "They do, every day," said Schottenstein, chief executive of M/I Homes, a home builder based in Columbus, Ohio.

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He laughs, saying his sanity is questioned because, in the darkest hour the housing industry has seen in decades, he is about to expand his firm -- ranked among the 20 largest in the nation -- into the Chicago market.

And he is among a handful of others -- new builders and established out-of-towners -- setting up shop in Chicago. At least a couple of real estate brokerages also are moving in.

"We're not just hard-headed Buckeyes or contrarians," said Schottenstein. "Chicago in our view represents one of the strongest housing markets in the Midwest."

This despite the fact that many analysts are not expecting an industry upturn until 2009 or beyond and amid a tide of red ink. M/I Homes reported a net loss of $42.6 million in the second quarter, joining a parade of others.

K. Hovnanian Homes, for example, which builds in Chicago under the Town & Country Homes brand, reported a second-quarter loss of $80.5 million. Pulte Homes, KB Home and Lennar Corp., which also have Chicago presences, lost $507.6 million, $148.7 million and $244.2 million respectively in the quarter.

M/I at this point has one staff member based in Chicago who is shopping for finished lots to build on; it anticipates opening two to four subdivisions here next year, Schottenstein said.

"This is a time to be careful and a time to be prudent, but we think it's a time of opportunity," Schottenstein said. "Laced between the negative news reports there are still a lot of people buying homes."

Schaumburg home building consultant Tracy Cross says M/I is the only national builder that has openly declared its intention to come to Chicago.

"But there are people looking at this market, I can tell you that -- other big public builders and big private builders," he said.

And this doesn't count the start-ups -- such as J. Lawrence Homes, which began sales a couple of months ago in Joliet and Wadsworth. The firm was founded by Chicago home building veteran John L. Wozniak and James L. Chittaro, a former banking executive.

In this environment, Wozniak says his Naperville-based company's sale of 11 homes among 162 lots meets its expectations.

"We see ourselves growing into a couple hundred homes per year," Wozniak said. "The market peaked here a couple of years ago at about 34,000 new homes, and it may have gone down now to around 20,000," which he said would have been considered healthy in preboom times.

"I've seen the East and West Coasts go up and down a few times, but [Chicago] has been a pretty steady performer and never had the wild swings that the others had," he said. "I don't think we lost a tremendous amount of ground, and I don't think it will take that long to come back."

Cross, who said he expects the housing market to improve gradually next year, agrees.

"Right now is probably the best time to start up something or to become aggressive," he said, explaining that though land hasn't become more affordable, many builders are willing to sell developed lots at a 15 percent discount from the sales peak.

"I've told them, now is the best time to play like the Cheshire Cat in the tree, and watch what's going on beneath it and become very, very strategic," he said. "You have to pick the right product and have the right places. That's the Cheshire Cat picking his teeth."

Steve Murray, a real estate industry consultant in Littleton, Colo., said he is not surprised by these expansion plans.

"What do you think builders do? They build," he said. "[The publicly traded firms] have land, and they have shareholders who expect a return."

Copyright © 2007. Chicago Tribune.