The number of homes sold in southeastern Wisconsin was up significantly in 2012, but the prices of homes sold continued their post Great Recession slide.
Some local housing market experts say home prices in the area could finally increase in 2013.
The housing market has favored buyers for several years with depressed prices and low interest rates. But many buyers lacked confidence in the weak economy after the recession to purchase a home.
Last year, as the slow economic recovery continued, buyers showed more confidence and more homes were sold.
“In 2012 the economy seemed to be solidifying,” said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors. “People felt confident in their jobs.”
“People by and large are more confident that things are at least stabilizing,” said Kevin Donnell, president and chief operating officer of First Weber Group.
But at the same time, many potential home sellers opted not to sell, choosing instead to wait until housing prices rose.
“A lot of sellers are not willing to list,” Ruzicka said.
As a result the supply of homes on the market in the metro Milwaukee area has dwindled. The supply (the time it would take to sell all of the homes currently for sale) of non-distressed homes on the market is at about six months and the supply of all homes, including distressed and foreclosed homes, is about seven to eight months, Ruzicka said. Donnell also estimates the current housing market supply in the area to be about six to eight months.
That amount of supply represents a balanced market, moving towards a seller’s market, Ruzicka and Donnell said. That is a major shift from previous years with much larger levels of supply and clear seller’s market conditions, they said.
“We are returning to a healthy market,” Donnell said.
This shift of increased demand and lower supply should finally result in home price increases, Ruzicka and Donnell said.
“Not necessarily by a huge percentage or margin, but I think you are going to see that upward trend begin,” Donnell said. “I think we are going to see some increase in prices because of inventory shortages.”
Ruzicka predicted that price increases will occur first with high end homes, which had the largest drop during the housing market collapse and have the most room to recover.
But Donnell disagreed saying the high end market still has too much supply. He predicts that the lower end and middle portions of the market will see price increases first.
The huge Generation Y, or Millennial Generation, is getting older and more of them are reaching the home-buying stage of their life, which should help boost the market, Ruzicka said.
However, the financing markets has shifted from being way to easy to obtain a mortage prior to the recession to overly tight and some buyers that ought to be able to obtain a mortage are unable to, Donnell said.
Still, as the economy continues to slowly improve buyers are expected to be active and sales levels should continue to improve in 2013, Donnell and Ruzicka said.
Final fourth quarter housing statistics were not available at press time, but the first two months of the quarter were extremely busy for home sales and then December slowed to normal levels, Ruzicka said. However, foot traffic levels at open houses remained high in December, he said.
“I think that’s an indication we’re going to have a strong spring,” he said.
“This spring is going to be very interesting to watch,” Donnell said. “Activity is up significantly.”
The uncertain outcome of the fiscal cliff may have led some potential buyers to put off making a decision in December, Donnell said.
“People just wanted to know which way it was going to go,” he said. “A lot of people were stuck not knowing what was going to happen at the end of the year.”
Now that the tax issues of the fiscal cliff have been resolved, buyers may be willing to move forward with purchases this year. But Ruzicka is skeptical that the fiscal cliff impacted buying behavior.
“In the current political environment we have a crisis a minute,” he said. “People are like, ‘We’re going to go on with our life. Let the guys in Washington play in that sandbox. We’ll pay attention when they decide to grow up.'”
The housing market still faces other headwinds. The level of foreclosures and short sales has diminished, but remains a drag on the housing market, Donnell and Ruzicka said.
“They’re still out there,” Donnell said. “But it’s better than it was.”
As for the overall market, if prices do finally start to rise this year, more sellers will be willing to list their homes, Ruzicka said.
“Once prices start eeking up people will feel comfortable putting their house on the market,” he said. “People who do list (at a reasonable price) will get multiple offers on their property.”
