Prior to the Great Recession, when the housing market was booming, Waukesha-based Don Belman Homes Inc. built about 60 to 80 houses a year in southeastern Wisconsin, said Dan Belman, the company’s real estate manager.
Today, in the wake of the housing bust that was a major contributor to the recession, the company has only one home under construction, and it’s for the Metropolitan Builders Association Parade of Homes, not an actual customer.
“It’s been bad for two years,” Belman said. “Very, very bad.”
However, a recent cover story in Fortune magazine declares that the U.S. housing market is on the verge of a rebound. If the Fortune article is correct, that would bode well for the southeastern Wisconsin housing market.
“Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing,” the Fortune article states. “It’s time to buy again.”
The article has attracted the attention of some in the area’s housing industry. Richfield-based Miracle Homes has been citing the article in recent radio ads.
The Fortune article says that falling housing prices, a lack of new construction and rising costs of rental housing will eventually lead to a housing market rebound, as long as the overall economy continues to recover.
Housing values and housing starts have fallen in the Milwaukee area. The average home sale in southeastern Wisconsin was $227,165 in 2007. Last year, the average was $185,792.
Housing starts peaked at nearly 3,000 in the metro area in 2004. Last year, there were 859 housing starts in the metro area.
The lack of new construction has helped to reduce the glut of housing on the market. As of the end of March, the metro Milwaukee area has an inventory of homes for sale equal to about 12.5 months of supply in a normal market, down from 17.9 months of supply in February, said John Horning, executive vice president of Brookfield-based Shorewest Realtors.
“The market is returning to a more balanced level,” he said.
The number of home sales in the Milwaukee area has improved month-to-month in recent months, but that is largely because of a normal seasonal uptick. The number of homes sold in the area this year lags behind last year, but last year’s numbers were skewed by the federal homebuyers tax credit, which was intended to prop up the struggling housing market.
“A lot of demand was pushed forward,” Horning said.
The true test for the area’s housing market will be in the second half of the year, when it can be compared with last year’s post tax credit second half.
There are some small signs of improvement in the market, Horning said.
“We’re seeing more cash buyers, usually investors, which is a good sign that they think it’s a good time to invest in the market,” he said. “We’re starting to see homes come on the market that are in good condition and reasonably priced are getting multiple offers. That hasn’t been happening for awhile.”
However, tight credit and a lack of consumer confidence in the economy and in the housing market are major drags, Belman said. Many people who want to build a new home are unable to sell their existing home at a price that will make the move work for them, he said. Others cannot come up with enough of a down payment to get a loan.
“There’s a lot of people looking right now but most people can’t do anything,” he said.
Four people recently told Belman they sold their home and will rent for awhile.
“They don’t want to be invested in a home,” he said. “People just are not confident enough to buy right now.”
Still, Belman said he remains hopeful the market will recover at some point.
“When you’re in the hole there’s nowhere to go but up,” he said.