Single-family home construction increased significantly in the metro Milwaukee area in 2013 and more homes could be built in the region in 2014.
“We’re definitely hearing that everyone is busier,” said Kristine Hillmer, executive director of the Metropolitan Builders Association. “Things are looking much better than they have been for the last couple of years.”
The bursting of the housing market bubble was a major contributor to the Great Recession. When the market tanked, housing starts for single family homes in the metro Milwaukee area bottomed at 836 in 2009.
Then, after three years of modest increases, housing starts in the metro area were up 31.5 percent in 2013 to 1,277, according to Oshkosh-based MTD Marketing Services of Wisconsin Inc.
“We are seeing a high level of continued interest in new home activity, despite the horrible weather we are experiencing,” said Dominic Collar, president of MTD.
The region’s new single-family home construction activity in 2013 was the highest level since 2007, but is still far behind the peak of 3,007 housing starts in 2004 during the housing boom. Housing starts in the region were consistently above 2,500 from 2,000 to 2005.
“The market fell down so far it’s going to take a long time to get back to normal, whatever that is now,” Hillmer said.
The lack of new subdivision development in the region since the Great Recession is now resulting to a shortage of lots available for new home construction, Hillmer said. An example is in Oconomowoc, where Kaerek Homes and Stonewood Companies plan to build a new single-family home subdivision with about 145-150 lots on a 63-acre site north of the intersection of Lake Drive (County Highway Z) and Prairie Creek Boulevard. It would be the first new single family home subdivision development in Oconomowoc in several years, said city planner and zoning administrator Jason Gallo. Oconomowoc had several new subdivision developments that began between 2000 and 2005. Single family home development slowed significantly during and after the Great Recession, but in recent years the single family home lots in the city have been getting developed.
“We had a pretty good inventory of lots in existing subdivisions that were being filled in,” Gallo said. “(The availability of) those are coming to an end now.”
Hillmer predicts that lot shortages will lead to more subdivision developments in the metro area moving forward in 2014.
“We’re going to see more new subdivisions going in, but it takes time to get the infrastructure installed,” she said. “There are going to be lot shortages for awhile.”
Existing home market improves
The number of existing homes sold and the prices of homes sold also increased in 2013, demonstrating improvements in the housing market that are expected to continue in 2014.
The number of homes sold during the first 11 months of 2013 (the most recent data available) in the metro Milwaukee area was up 10.2 percent to 16,457, compared to 14,937 homes sold during the first 11 months of 2012, according to the Greater Milwaukee Association of Realtors.
During the first three quarters of 2013 (the most recent data available), homes in the eight county southeastern Wisconsin region sold for an average price of $185,151, up 6.6 percent from $173,600 in 2012, according to GMAR data.
That is still far below the 2007 market peak of $227,165, but for homeowners in the region the increase in home sale prices in 2013 is a first step toward a rebound in the value of their properties. The home sale price increase was the first significant increase for the region since 2010, which was artificially inflated early that year by the federal home buyer tax credit.
“Prices are starting to recover,” said John Horning, executive vice president of Brookfield-based Shorewest Realtors. “Definitely, we’re moving up. We’ve seen all parts of the market do well.”
“In general we are seeing prices increase,” said Mike Ruzicka, president of GMAR. “Prices are certainly on the way up. The good thing is it’s single digit (increases), based on supply and demand and not on speculation. Nothing too crazy. We’re pretty happy with the way things are going right now.”
Housing prices in the region could continue to rise this year. The CoreLogic Case-Shiller Index estimates that housing prices in the Milwaukee metro area will rise 6.2 percent from the second quarter of 2013 to the second quarter of 2014. However, the Zillow Home Value Forecast only projects a 0.4 percent increase for home values in the Milwaukee area during the next 12 months.
Ruzicka and Horning said they expect prices in the region to increase at a steady pace in 2014.
“I think it’s going to be more of the same,” Ruzicka said. “We’re still a couple of years away from (prices getting back to the 2007 peak).”
“I expect prices will continue to gradually increase,” Horning said. “That’s a good sign for the economy and for everyone else as well.”