After afour-year post Great Recession slump the housing market in southeastern Wisconsin is finally in recovery mode and the prices of homes sold this year are on the rise.
During the first three quarters of 2013, 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 data from the Greater Milwaukee Association of Realtors collected by BizTimes Milwaukee.
That is still far below the 2007 market peak of $227,165, but for homeowners in the region the increase in home sale prices this year is a first step toward a rebound in the value of their property.
The home sale price increase this year is the first significant increase for the region since 2010, which was artificially inflated early that year by the federal home buyer tax credit, which was an attempt to boost the housing market and the economy.
“Prices are starting to recover,” said John Horning, executive vice president of Brookfield-based Shorewest Realtors. “Definitely, we’re moving up. This has been a good year. We’ve seen all parts of the market do well.”
“In general we are seeing prices increase,” said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors. “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.”
In October, the most recent month that data was available for at press time, median home sale prices in southeastern Wisconsin were up 3.4 percent.
For the first three quarters of the year, home median home sale prices were (compared to the first three quarters of 2012), by county:
- Milwaukee, up 9.9 percent to $142,171
- Ozaukee, up 8.2 percent to $279,076
- Sheboygan, up 7.9 percent to $143,080
- Waukesha, up 7.6 percent to $278,424
- Racine, up 5.5 percent to $133,386
- Kenosha, up 3.8 percent to $138,217
- Washington, up 1.9 percent to $199,659
- Walworth, down 1.6 percent to $229,714
“Some areas are seeing (bigger price increases) than others,” Ruzicka said. “Milwaukee County had a significant foreclosure problem preventing prices from getting back to normal. They have had a big (home sale price) increase because their prices were down so low.”
Foreclosed home sales were about 40 percent of the market from 2009 to 2011 and dragged down prices in the entire market, Ruzicka said. As the economy has improved and many of the foreclosed homes have been purchased the number of foreclosures has dropped to about 10 percent, reducing the drag on the region’s housing market.
“(Foreclosures) are still going on but they are not nearly the problem they were a couple of years ago,” Ruzicka said. “We’ve seen a huge drop-off.”
“We’re seeing fewer short sales and fewer sales of bank-owned properties,” Horning said. “We’re definitely getting back to a normal market.”
At the same time, sales of higher-priced homes have improved, demonstrated by the price increases in Waukesha and Ozaukee counties. Shorewest’s Lake Country office in Oconomoowc has had the biggest sales gain this year for the firm, Horning said. The north shore area and Mequon have also done well this year, he said.
“(In recent years) the higher end market was very soft,” Horning said. “The recovery started with first time home buyers and the mid-priced market. Now it has worked its way up to the higher end.”
The number of homes sold is also up significantly this year. The four county metro Milwaukee area is on pace for about 18,000 home sales this year, which would be up 8.8 percent from 16,547 in 2012 and up 40 percent from 12,865 sales in 2010, Ruzicka said.
The increase in home sales has come as the economy has improved and interest rates remain low. For years after the Great Recession, area Realtors said that conditions, including low home prices, were idea for buying a home, but buyers lacked confidence in the economy and were reluctant to purchase a home. Now after a sluggish but sustained economic recovery, buyers have become more confident in their job security and have returned to the housing market.
“The buyers this year have been back,” Horning said. “They’ve been much more confident than they have been in the past.”
With more buyers in the market the inventory of homes for sale in the region has fallen into a more balanced position between buyers and sellers. Horning said the current inventory (the time it would take to sell all of the homes currently for sale) is about 7.5 months, a balanced market, down from 11.5 months of inventory a year ago. Ruzicka pegs the current inventory at about 6 months.
“Inventory has been coming down as the market shifted,” Horning said.
With a more balanced market buyers have been forced to make quicker decisions, otherwise they risk losing their chance to buy a property, Horning said.
“More buyers are out there,” he said.
“It’s very competitive,” Ruzicka said. “Neither (buyers nor sellers) are driving the discussion right now.”
Housing prices in the region could continue to rise next 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.”
